The Coles Group Limited (ASX: COL) share price is up around 4% as the market consumes the FY19 report numbers.
After 10 years being owned by Wesfarmers, Coles Group was split from the broader Wesfarmers conglomerate (which owns Bunnings Warehouse) in November 2018. However, the Coles name has operated in Australia for 100 years. Today Coles is one of the largest retailers in the country, serving 21 million customers per week across its supermarkets, Coles Express, Online, Vintage Choice and others.
Coles’ Healthy FY19 Report
The supermarket giant said that its sales revenue, excluding Fuel sales and Hotels, rose by 3.1% to $35 billion. In the supermarkets segment, comparable sales growth was 2.7%, which was the 47th consecutive quarter of comparable sales growth.
But, management were pleased to point out online sales growth of 30% to $1.1 billion. It also achieved its first operating profit in FY19.
Group underlying EBIT (click here to learn what EBIT means) fell 8.1% to $1.325 billion, although the supermarket EBIT rose by 2.2% to $1.18 billion. The disappointing performance of Coles Express was the cause of the group EBIT. Express EBIT dropped 69.3% to $50 million. That’s why Coles negotiated a new contract with Viva Energy Group Ltd (ASX: VEA).
For the bottom line, Coles reported that its net profit from ordinary/continuing activities rose 5.4% to $1.08 billion, but statutory net profit including discontinued operations dropped 9.1% to $1.43 billion.
During the year Coles also entered into a joint venture with Australian Venue Co regarding Coles’ hotel and retail liquor business in Queensland to focus on liquor retailing.
Coles Dividend
The Coles Board has decided to pay a total fully franked dividend of 35.5 cents per share. This includes a special dividend of 11.5 cents per share and a final dividend of 24 cents per share.
The final dividend reflects a 80.1% payout of earnings before significant items.
Is The Coles Share Price A Buy?
Coles has a new ‘fresh’ strategy to gain shoppers and market share with a focus on using technology partnerships
to win the supermarket battle against Woolworths Group Ltd (ASX: WOW), Aldi and others.
In a FY20 trading update, the supermarket said that Coles Little Shop 2 is again resonating with customers, although Coles Express earnings could remain subdued for a while.
Coles expects its new strategy to deliver $150 million in annual benefits, which I think is the main thing it can do to grow profit. Customers are price conscious, so Coles has to win on better quality products and services.
The supermarket business may offer defensive earnings, but it’s not likely to grow fast, which is why I’d rather buy shares of the reliable businesses in the free report below ahead of Coles.
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