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Coles Group Ltd - Stock Quote COL

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Morningstar's Coles Group Ltd Stock Analysis

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Economic Moat


Capital Allocation


Coles’ Earnings Set to Recover From Post COVID-19-Related Costs Peak in Fiscal 2022.

Analyst Note

| Johannes Faul, CFA |

We maintain our fair value estimate for no-moat Coles at AUD 13.60 per share, with the group’s third-quarter fiscal 2022 sales growth of 3.6% broadly in line with our expectation of 3.4%. Our fiscal 2022 sales and earnings estimates are virtually unchanged. COVID-19-related disruptions continued to add significant costs across Coles’ businesses and our forecast of materially lower group EBIT margins is unchanged. During the quarter, the main driver of pandemic-related costs was absenteeism at warehouses and stores due to isolation requirements. We estimate COVID-19-costs to be about AUD 115 million higher in fiscal 2022 than in the prior fiscal year, shaving off some 30 basis points from operating margins. The recent floods on the Australian east coast damaged stores and goods, and increased freight costs, adding AUD 30 million in one-off costs. However, we expect the costs of the floods to be recovered from insurance by fiscal 2023.

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Coles Group Ltd's Company Profile

Business Description

Coles Group Limited is one of Australia's largest retailers, operating the second-largest supermarket chain behind market leader Woolworths, and is the country's third-largest liquor retailer. The group has an extensive store network of about 2,500 store outlets and roughly 80% of Australian live within a 10-minute drive from their nearest Coles store. The retailer employs some 110,000 people, who process over 20 million individual customer transactions a week. This compares with Woolworths processing almost 30 million customer transactions per week from Australia's population of 25 million.

800-838 Toorak Road, Hawthorn East
Melbourne, VIC, 3123, Australia
T +61 398295111
Sector Consumer Defensive
Industry Grocery Stores
Most Recent Earnings
Fiscal Year End Jun 27, 2022
Stock Type