Coles share price: where next following interim results?

We take a look at the highlights from Coles' first-half FY20 results.

Coles Group (ASX: COL) today released a set of H1 results that showed modest revenue growth, the revelation of staff underpayments and an interim dividend of 30 cents per share.

In response, the stock was bid down by the afternoon session – with the Coles share price trading at the $16.74 mark by 14:39 AEDT.

Even when considering today's price action, in the last year, Coles has seen its share price rise ~35%.

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Coles share price: fundamentals in focus

On the top-line, Coles today reported modest revenue growth across the Group in H1: Supermarkets revenue hit $16,583 million (+3.3%), Liquor sales reached $1,691 million (+3.3%) and Express recorded revenues of $572 million (+4.6%).

All up, Coles Group reported total first-half sales of $18,846 million.

On the bottom-line, the supermarket reported earnings (EBIT) of $725 million – representing an increase of 0.4%, on a half-on-half basis.

Commenting broadly on these interim results, the Coles CEO, Steven Cain said:

'I am pleased, in the release of our first half results, that we have delivered our demerger dividend commitment and are making clear, early progress on our strategy execution, particularly in Supermarkets.'

The outlook

Though management noted that Q3 comparable Supermarket sales have thus far remained consistent with Q2 figures, it was pointed out that 'the incremental costs associated with the removal of plastic bags and increased flybuys promotions which were a benefit to Supermarkets EBIT growth in the first half of FY20 will not occur in the second half of FY20.’

In saying that, it was also pointed out that EBIT growth would benefit from a 'smarter selling provision' in the second part of the financial year.

A $20 million provision

Finally, as part of today’s release – Coles also announced a $20 million provision (included in Group EBIT) – related to a shortfall in salary payments, interest and other costs related to staff renumeration.

In a separate media release, following an extensive investigation, Coles announced that they have identified discrepancies between some employees' renumeration across the Group and the General Retail Industry Award.

According to Coles, these issues effect less than 1% of total team members. These payment issues date back as long as six years.

Commenting on this issue, Steven Cain, the Group’s CEO, said:

‘We are working at pace with a team of external experts to finalise our review. Once completed we will contact all affected team members, both current and former, to remediate any identified differences in full.’

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