What is the outlook for Coles shares in 2024?

Let's dive into what could impact Coles next year.

| More on:
A little girl holds broccoli over her eyes with a big happy smile.

Image source: Getty Images

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

Coles Group Ltd (ASX: COL) shares are having a disappointing end to 2023. Since the start of August 2023, the Coles share price has dropped 14.5%, as we can see on the graph below.

The company's revenue has continued to climb as Australia's population grows and inflation adds to shelf prices. However, costs have been rising too.

So could the supermarket giant fare better in 2024? Let's take a look.

What did the ASX share say about the outlook?

Coles has the best insight into what's going on with its business.

The company reported in the first quarter of FY24, sales at its supermarkets and liquor were up 4.7% and 1.8% respectively, with supermarket e-commerce revenue up 24.6% and liquor e-commerce revenue growth of 32.2%.

Coles told its annual general meeting (AGM) that availability in stores was improving and inflation in key categories was "moderate". The supermarket business noted fresh produce and red meat were "in deflation" with lower prices year over year on cucumbers, berries, beef and lamb. First quarter inflation was 3.1%, or 5.7% excluding tobacco and 'fresh'.

The company aims for its new 'simplify and save to invest' program to achieve $1 billion in cumulative savings over the next four years.

Coles' Redbank automated distribution centre in Queensland already services 219 stores, and it's working toward the Kemps Creek location in NSW receiving its first inbound deliveries in the third quarter of FY24. The first customer fulfilment centre is scheduled to go live in NSW in the middle of the 2024 calendar year.

However, the company estimated in its FY23 result that the recent increase in the Victorian payroll tax would impact by "approximately $20 million per annum". Additionally, Coles said the Fair Work Commission annual wage increase means store remuneration will increase by 5.75%.

Forecasts for Coles shares

After seeing the Coles FY24 first quarter update, the broker UBS noted that supermarket inflation was lower and volumes improved.

UBS suggests population growth and "trading down from out of home" eating support sales growth at supermarkets, ignoring inflation. However, the broker is concerned Coles is not executing as well as its rival Woolworths Group Ltd (ASX: WOW). And "its broader position in market suggests greater risk of share loss to Aldi".

UBS also warns the earnings before interest and tax (EBIT) margin could decline despite initiatives to boost the gross profit margin. Theft is a key issue in the broker's eyes, though higher wages, costs from the distribution warehouses and higher depreciation and amortisation are also expected.

However, UBS thinks Coles' efforts ('skip scan' and smart gates in 250 of the most impacted stores at the end of 2023) will help reduce excessive theft.

UBS has forecast Coles could generate earnings per share (EPS) of 74 cents in FY24 and pay a dividend per share of 60 cents. That would put the Coles share price at 21x FY24's estimated earnings with a grossed-up dividend yield of 5.5%.

Should you invest $1,000 in Washington H. Soul Pattinson And Company Limited right now?

Before you buy Washington H. Soul Pattinson And Company Limited shares, consider this:

Motley Fool investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and Washington H. Soul Pattinson And Company Limited wasn't one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

And right now, Scott thinks there are 5 stocks that may be better buys...

See The 5 Stocks *Returns as of 30 April 2025

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Coles Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Consumer Staples & Discretionary Shares

A customer and shopper at the checkout of a supermarket.
Consumer Staples & Discretionary Shares

Broker watch: Are Woolworths shares a buy?

Do analysts think this supermarket giant would be a good pick for investors? Let's find out.

Read more »

Supermarket trolley with groceries on top of a red pointing arrow.
Consumer Staples & Discretionary Shares

Up 31% in a year, just how much more upside does Macquarie tip for Coles shares?

Can Coles shares smash the ASX 200 returns again in the year ahead?

Read more »

A customer and shopper at the checkout of a supermarket.
Consumer Staples & Discretionary Shares

Woolworths shares storm higher on strong Q3 update

The supermarket giant outperformed expectations during the quarter.

Read more »

A woman holds up hands to compare two things with question marks above her hands.
Consumer Staples & Discretionary Shares

Compare the pair: Accent Group vs JB Hi-Fi shares

Which is a better option out of these two consumer discretionary shares. 

Read more »

person sitting at outdoor table looking at mobile phone and credit card.
Consumer Staples & Discretionary Shares

If I could only own 1 ASX retailer for the next 5 years it would be this one

This stock could be a great long term pick according to one leading broker.

Read more »

A couple in a supermarket laugh as they discuss which fruits and vegetables to buy
Consumer Staples & Discretionary Shares

Coles share price drops on Q3 update

Let's see how the supermarket giant performed during the three months.

Read more »

Business man with a cigar in his mouth counting US dollars.
Consumer Staples & Discretionary Shares

Both Labor and the Coalition to crackdown on illicit tobacco trade, which ASX stocks could benefit?

Could a tobacco crackdown benefit these stocks?

Read more »

Young girl drinking milk showing off muscles.
Dividend Investing

Up 41% in 2025, how this ASX 200 dividend stock is primed for 'continuing growth'

A leading expert expects ongoing growth from this high-flying ASX 200 dividend stock.

Read more »