FY2023 ended up being a great year for most ASX 200 shares. But sadly for Coles Group Ltd (ASX: COL) shares, investors were left behind.
The S&P/ASX 200 Index (ASX: JXO) ended up having a bumper 12 months last financial year, rising from the 6,568.1 points it finished at on 30 June 2022 to the 7,203.3 points we saw last Friday. That was a gain worth a healthy 9.67%.
But sadly, the party at Coles wasn't nearly as wild. This ASX 200 consumer staples giant finished FY2022 at $17.81 a share and ended up at $18.42 a share last Friday. That means that this supermarket operator recorded a gain of 3.43% for the 2023 financial year. Nothing too depressing of course, but still a conspicuous underperformance of the broader ASX 200.
To be fair, Coles doled out some meaningful dividend income to investors over FY2023. As is typical for the grocer, Coles paid investors two dividends over the past 12 months.
There was the final dividend of 30 cents per share that investors bagged last September. As well as the interim dividend of 36 cents per share that was given out back in March. Both payments were fully franked and represented significant increases over what investors were treated to in FY2022.
For an investor who bought Coles at the start of FY2023 for $17.81 a share, these two dividend payments would have added another 3.71% or so to their total FY2023 returns.
But even so, we still have a market laggard here. So what held back Coles shares over the past 12 months?
What was holding this ASX 200 share back in FY2023?
It seems the biggest contributor to Coles' lacklustre FY2023 was the full-year earnings report that the company delivered for FY2022 in August last year. As we covered at the time, this saw the company report a slight drop in earnings before interest and tax (EBIT) of 0.2% to $1.87 billion.
Although revenue and profits were both up, investors seemed spooked by the company's warnings that food and fuel inflation would be crimping its profits going forward.
As a result of this report, the Coles share price spent the following two months losing around 15% of its value. Although the shares recovered from there in the following months, the results still weighed heavily on the company's performance for the rest of the financial year, as you can see below:
Coles' first-half update earlier this year showed some increased positivity, but it clearly wasn't enough to convince investors to make Coles shares a market beater for FY2023.
What's next for Coles shares?
Fortunately for Coles investors, at least one ASX broker reckons Coles might turn a corner in FY2024.
Last month, we looked at ASX broker Citi's buy rating on Coles shares.
Citi gave the grocer a 12-month share price target of $20.20, which would see investors enjoy a return of just over 10% if realised. Citi is also expecting Coles to continue to raise its dividend in FY2024, pencilling in a total of 73 cents per share for investors.
So no doubt Coles shareholders will be hoping Citi is on the money here. But let's wait and see what FY2024 brings for the Coles share price.
