Coles Group (COL) SNAPSHOT
Profile: Coles (COL) is a leading retailer headquartered in Melbourne, with products including fresh food, household goods, liquor, fuel and financial services. As at June 2019, Coles employed c.114,000 staff and operated c.2,450 retail outlets. ~80% of Australians live within a 10-minute drive of a Coles store.
History: In 1914, Coles opened its first variety store in Collingwood, Victoria. The first Coles supermarket was opened in 1960 in Victoria. Coles merged with Myer Emporium in 1985 to form Coles Myer Limited. Subsequently, Coles Myer sold Myer to Newbridge Capital and The Myer Family Company in 2006. In 2007, Coles Group (including Kmart, Target and Officeworks) was acquired by Wesfarmers (ASX: WES). WES demerged Coles, while retaining a 15% stake, in November 2018.
Earnings composition: In FY19, Coles Supermarkets reported $31bn in revenue and EBIT of $1,191m (89% of group EBIT). The Liquor division generated $3.2bn in revenue and $133m in EBIT (10%). The Coles Express division delivered $4.0bn and $46m (3%) of group revenue and EBIT respectively.
Most recent result – 1H20: EBIT (Earnings Before Interest and Tax) increased 0.4% on the prior corresponding period (pcp) to $725m. Supermarkets sales increased 3.3% on the pcp to $16.6bn, with growth in both the basket size and transaction size. Supermarkets EBIT was up 5.7% on the pcp to $637m; benefitting from the lack of incremental costs experienced in the prior period. Liquor revenue increased 3.3% on the pcp to $1,691m. Liquor EBIT declined 9.9% during the period, as increased promotional activity impacted margins. As expected by COL, Express EBIT declined from $51m to $4m under the New Alliance Agreement announced in March 2019. Net profit after tax from continuing operations increased 1.7% on the pcp to $498m. A 30-cent interim dividend was declared.
Company outlook: Early 3Q20 supermarkets sales have been consistent with 2Q20. Liquor is expected to be impacted in 2H20 by range reviews and clearance activity, as well as volume impacts from bushfires.
Important dates: Ex-dividend date was 27 February 2020. Payment date is 27 March 2020. 3Q20 sales results scheduled for 29 April 2020. FY20 results are scheduled for 18 August 2020 and COL’s AGM is scheduled for 13 November 2020.
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