Is the Coles Group Limited (ASX: COL) share price a buy?
The verdict after the release of its strategy update seems to be a resounding "yes" as the Coles share price is up 4.2% at the time of writing and it's up 7.6% since the announcement earlier this week.
It was a compelling update with the company addressing many of the ways that it can improve and standout against the crowd.
One of the main messages was that Coles would be investing in technology to improve its operations with its supply chain network, stock and automating manual tasks. Coles also mentioned "simplifying above-store roles to remove duplication", which may be alluding to job cuts.
The construction and completion of its automated distribution warehouses involving Witron and Ocado will be integral to deliver on its efficiency goals. Coles hopes to deliver $1 billion of cumulative savings by FY23.
Coles is also going to try to improve its offering to customers, particularly in the areas of convenience food and health offerings, with an increased focus on private label brands.
The other way Coles wants to attract customers is by being able to claim to be Australia's most sustainable supermarket with its products, food wastage and energy usage (including installing solar panels).
What does this mean for Coles shareholders?
Well, apart from a quick rise in the share price, it will hopefully mean revenue growth at least in line with market growth and an ongoing pleasing dividend, which Coles aims to address with an "attractive dividend payout ratio".
If Coles can keep growing revenue and profit whilst investing for the future then it could be a fairly attractive business to consider for income with how expensive some of the tech shares are. But I'm sure Woolworths Group Ltd (ASX: WOW) will have something to say about Coles' plans.
Coles is trading at more than 21x FY20's estimated earnings with a possible grossed-up dividend yield of 5.5%.
