The Coles Group Ltd (ASX: COL) share price has soared 12% this week in response to the FY25 result. You may be wondering whether analysts still view the business as good value.
Before analysing the result, I'll note that the FY25 result included 52 weeks, while FY24 had 53 weeks. The company provided some numbers based on 52 weeks for both financial years so investors could compare apples to apples.
Normalised total sales increased 3.6%, underlying normalised operating profit (EBIT) increased 6.8% and normalised underlying net profit grew 3.1%.
The trading update for FY26 also showed growth, with supermarket sales revenue up 4.9% (or 7% excluding tobacco). Liquor sales were flat.
Let's take a look at what experts from Macquarie Group Ltd (ASX: MQG) thought of the result.
Outperform rating on Coles shares
Macquarie said "good things are happening" at Coles, with the supermarket business "likely gaining share", with implied volume growth of 5.6% in early FY26 trading, which was an acceleration of sales growth compared to the 2.7% growth in FY25. The broker has an outperform rating on the business.
The analysts noted that sales strength in early FY26 has been seen by some other retailers. Macquarie wondered whether Coles had "gained share in its core merchandise or perhaps some restoration of sales in categories lost to non-supermarket channels, e.g. Health and Beauty, Pet and Cleaning?".
The broker noted that Coles' supply chain investments are "bearing fruit", with the automated distribution centres (ADCs) and customer fulfilment centres (CFCs) performing well, supporting improvements in customer satisfaction metrics, capacity and availability. If capacity at these facilities continues to be filled, there is "material upside to supermarket earnings" according to Macquarie.
One main negative for the broker on Coles shares was the potential for the cash cost of doing business (CODB) being forecast to grow by 6%, with labour, electricity and technology costs "rising significantly". The company is aiming to deliver total savings of at least $1 billion by FY27, with $565 million of that achieved in the last two financial years.
Due to the improvement in performance in the supermarkets division and lower forecast net interest costs, Macquarie increased the Coles earnings per share (EPS) projection for FY26, FY27, and FY28 by 3%, 3.2%, and 3.3%, respectively.
Macquarie's target price
Thanks to those changes in expected earnings, the broker increased its target price on Coles shares by 5.4% to $25.40.
A target price is where the broker thinks the share price will be in 12 months. Therefore, Macquarie suggests the Coles share price could rise by more than 8% in the next year. Plus, it predicts Coles could pay an annual dividend per share of 77 cents, which would be a dividend yield of 3.3%.
Macquarie concluded its thoughts on Coles shares with the following:
Management has demonstrated its ability to execute in challenging market conditions, maintaining margins despite competitive pressures intensifying. We forecast a three-year EBIT CAGR of ~9% to FY28E.
