The Coles Group Ltd (ASX: COL) share price has bounced from the Iran conflict low, as the chart below shows. However, the supermarket business is also lower by 6% from September 2025. Considering there's a lot of potential inflation on the cards due to the Middle East conflict, it may be a smart one to think about.
A few years ago, the business was able to pass on the elevated inflation to customers to offset the rise in costs. I think it would be largely be able to do so again, if there were another bout of extended inflation in food prices.
Time will tell how much inflation occurs as a result of the jump in fuel and fertiliser costs.
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Is the Coles share price an opportunity?
I think the company's FY26 half-year result reflected the ongoing performance of the business.
HY26 supermarket sales increased by 3.6% to $21.4 billion, while total revenue rose 2.5% to $23.6 billion. Supermarket operating profit (EBIT) climbed by 14.6% to $1.2 billion and group EBIT rose 10.2% to $1.2 billion. The liquor EBIT and 'other' EBIT loss essentially cancelled each other out in HY26.
Underlying net profit after tax climbed by 12.5% to $676 million. This is a key driver of the Coles share price.
The fact that EBIT grew faster than revenue and that net profit rose faster than EBIT demonstrated the company's ability to generate operating leverage. In other words, improving profitability throughout the business.
Part of the recent success of the business can be put down to its new distribution and logistics facilities. It has built new automated distribution centres (ADCs) and customer fulfillment centres (CFCs). This can help with better stock availability, better efficiencies on costs and improved product freshness.
The CFCs can also help the company provide a strong online shopping offering. During the HY26 period, e-commerce sales grew by 27%, with online sales representing 13.1% of total supermarket sales. As time goes on, its online capabilities will be increasingly important, in my view.
If the business can continue growing its sales, slowly improve its profit margins and hike its dividend, it could be a solid, dependable pick.
In terms of the dividend, the business has increased its annual dividend per share each year since 2019. It currently has a grossed-up dividend yield of 4.6%, including franking credits, at the time of writing.
When you put all of that together, I think the Coles share price is appealing for the long-term, though it's not the cheapest it has been.
