Coles share price on watch after reporting third quarter sales surge

The Coles Group Ltd (ASX:COL) share price will be on watch on Wednesday after reporting a surge in third quarter sales…

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Coles Group Ltd (ASX: COL) share price could be on the move today after it delivered exceptionally strong sales growth in the third quarter.

What did Coles announce?

This morning Coles released its third quarter update and revealed just how well it has performed during the coronavirus pandemic.

According to the release, Coles recorded third quarter sales revenue of $9.2 billion, which was an increase of 12.9% on the prior corresponding period.

The company's key Supermarkets division was the biggest driver of growth. After performing strongly in in January and February, sales took off in March when panic buying hit Australian supermarkets. In respect to the latter, according to Nielsen, Australians made more than 30 million incremental trips to supermarkets in March.

This led to the Supermarkets division achieving comparable sales growth of 13.1%. This was its 50th consecutive quarter of comparable sales growth. Management must now be scratching its head trying to figure out how to top this next year to maintain its impressive winning streak.

This ultimately led to total Supermarkets sales growing 13.8% to $8,230 million during the quarter. Which represents 89.2% of its overall quarterly sales.

Also supporting its growth were positive performances by its Liquor and Express businesses. These businesses delivered comparable stores sales growth of 7.2% and 4.3%, respectively, over the prior corresponding period.

This was a particularly positive result for the Liquor business given how it was negatively impacted by bushfire smog and floods in January and February.

Outlook.

Management advised that the first four weeks of the fourth quarter, which include the Easter period and ANZAC Day, Supermarkets comparable sales growth has broadly trended back toward the levels seen in the early part of the third quarter pre COVID-19.

During this period, Coles has seen an increase in basket size which has been partially offset by a decline in transactions driven by social distancing measures.

Management appears confident on its Liquor business in the near term. It expects to continue to experience elevated sales as long as restrictions on hotels, pubs, clubs and licensed venue operators continues.

Finally, in respect to its costs, Coles expects an elevated cost base in the fourth quarter as a result of the additional investment it is making as a result of COVID-19.

Coles isn't the only supermarket operator releasing its update this week. Rival Woolworths Group Ltd (ASX: WOW) is scheduled to release its third quarter update and (as I discussed here) similarly strong sales growth is expected from it.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of COLESGROUP DEF SET. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Market News

The silhouettes of ten people holding hands with their arms raised against the sky, as the sun rises or sets in the background.
Share Gainers

Here are the top 10 ASX 200 shares today

ASX shares finished the trading week on a high this Friday.

Read more »

A businessman stacks building blocks.
Technology Shares

6% gain! What's up with Block shares today?

Block shares are up more than 34% since 2 May.

Read more »

Broker looking at the share price.
Broker Notes

Brokers name 3 ASX shares to buy today

Here's why brokers are feeling bullish about these three shares this week.

Read more »

A young man punches the air in delight as he reacts to great news on his mobile phone.
Share Gainers

Why ARB, Block, Mayne Pharma, and Paladin Energy shares are charging higher today

These shares are having a strong finish to the week. But why?

Read more »

A woman puts her hands up as she smashes and breaks through a glass ceiling.
Share Gainers

How these 5 ASX 200 stocks are smashing the benchmark this week

These fives ASX 200 stocks have made some very happy shareholders this week. Here’s how.

Read more »

Bored man sitting at his desk with his laptop.
Share Fallers

Why Catalyst Metals, Duratec, Nufarm, and Rio Tinto shares are dropping today

These shares are ending the week in the red. But why?

Read more »

A smiling woman at a hardware shop selects paint colours from a wall display.
Broker Notes

After its strategy day, what does Macquarie think Wesfarmers shares are worth?

Let's see what the broker is saying about this blue chip.

Read more »

Buy, hold, and sell ratings written on signs on a wooden pole.
Technology Shares

After surging 13% yesterday, are TechnologyOne shares a buy, hold or sell according to Macquarie?

Valuations matter when investing, and Macquarie feels no different.

Read more »