Coles Group Ltd (ASX: COL) shares had a day to remember on Tuesday. The supermarket giant's shares ended the day 8.5% higher at $22.50.
This was driven by the release of the company's full year results. And it isn't hard to see why investors were fighting to get hold of its shares.
Grady Wulff, Senior Market Analyst at Bell Direct, told The Motley Fool Australia:
Coles reported FY25 results slightly ahead of expectations, with total sales rising 1.8% to $44.49 billion, driven by strong performance in its supermarket division, which delivered $40 billion in sales, up 4.3% on a normalised basis and beating market forecasts.
And Wulff highlights that FY 2026's outlook is positive thanks to further volume growth, easing inflation, and consumer preferences. She adds:
Looking ahead to FY26, Coles is expected to benefit from continued volume growth, stable inflation (around 3% annually for Q4FY25), and consumer response to its value-led strategy, despite headwinds from declining tobacco sales.
Image source: Getty Images
Should you buy Coles shares?
The team at Bell Potter has been running the rule over the supermarket giant's results and was pleased with what it saw.
In fact, it liked what it saw so much that it has upgraded its shares this morning.
According to the note, the broker has upgraded Coles shares to a buy rating (from hold) and lifted the price target on them to $24.30 (from $22.10).
Based on its current share price of $22.50, this implies potential upside of 8% for investors over the next 12 months.
In addition, it is forecasting a fully franked dividend yield of 3.2% in FY 2026, which boosts the total potential return beyond 11%.
Commenting on its forecasts and its buy recommendation, Bell Potter said:
NPAT forecasts are unchanged in FY26e and -3% in FY27e. Our target price lifts to $24.30ps (prev. $22.10ps) principally on model roll forward and lower net debt.
Upgrade to Buy (from Hold). Continued delivery against 'Simplify & Save' initiatives ($565m delivered to date vs. a target of $1Bn by FY27e), generating a return on ADC/CFC investments (~$1.45Bn investment and $103m of start-up costs in FY25) and a strengthening consumer backdrop are all reasons for a more favourable view.
All in all, despite Coles shares rising an incredible 75% over the past 12 months, it may not be too late for investors to snap them up according to Bell Potter.
