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Coles Group Ltd COL

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Morningstar’s Analysis

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Normalising Trading Conditions Present Headwinds and Tailwinds for Coles in Fiscal 2022

Analyst Note

| Johannes Faul, CFA |

Our earnings estimates for Coles Group are unchanged and we maintain our AUD 13.20 fair value estimate following its first-quarter trading update. The September quarter was predictably distorted by coronavirus lockdowns within New South Wales and Victoria, which disrupted operations and consumer shopping habits. While we view the Australian supermarket sector as broadly overvalued, on a relative valuation basis, we favour Coles over Woolworths. At our fair value estimates, shares in no-moat Coles and narrow-moat Woolworths screen some 30% and 60% overvalued, respectively.

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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