Coles share price: where next following investor strategy day?
Coles ramps up investment in the future, investors turn cold.
Coles share price flails
A storied history can’t save you from the wrath and whims of the market.
After releasing its latest investor strategy day presentation on Thursday, 17 June, the Coles share price got crushed. By 10:26am, the stock was down over 5%, trading around the $16.18 mark.
So what got investors riled up? Below we look at some highlights from the investor presentation.
Primarily, we got new insight into Coles’ data-focused future, though investors may have been shocked just how much this future will cost to create.
Centrally, expectations around the Smarter Selling program – a blended strategy that focuses on technology and headcount reduction – was also touched on in the investor presentation.
The Smarter Selling program, is expected to provide the company with $200 million in cost savings benefits in FY22, down from $250 million in savings expected in FY21. As it stands, total cumulative benefits driven by this program are expected to hit $550 million by the close of this fiscal year.
What's your view on Coles? Whatever you think, you can use CFDs to trade both rising and falling markets, through IG’s world-class trading platform now.
For example, to buy (long) or sell (short) Coles using CFDs, follow these easy steps:
- Create an IG Trading Account or log in to your existing account
- Enter ‘Coles’ in the search bar and select it
- Choose your position size
- Click on ‘buy’ or ‘sell’ in the deal ticket
- Confirm the trade
Alternatively, you can invest in shares directly through our share trading service.
Up, up, costs are up
Expectations around Coles’ Ocado and Witron automation projects, which remain under construction across New South Wales, Victoria and Queensland, where also highlighted during the investor presentation.
These projects speak to the supermarket’s long-term focus, with net earnings (EBIT) benefits not expected to be realised until FY25 from the Witron project. By comparison, sales benefits from the Ocado projects are expected to come slightly quicker, anticipated to be realised in FY24 'as the customer fulfilment centres build their volumes.'
Operating expenses (OPEX) from these projects are anticipated to hit $75 million in FY22 and $160 million in FY23.
Finally, despite the savings expected to be realised off the back of the Smarter Selling program, capital expenditure (CAPEX) is expected to hit $1.4 billion in FY22, off the back of the company’s growth projects and other investments. Potentially explaining the morning’s sell-off, this CAPEX guidance would imply a significant step up from prior periods. For reference, for the FY20 full-year the company booked net capital expenditure of $666 million and in the first-half of FY21 booked net capital expenditure of $509 million.
I guess you have to spend money to make money.
Finally, FY22 depreciation and amortisation is expected to be in the range of $1.67 billion to $1.72 billion.
Coles isn’t the only one spending big on future proofing their business, mind you. Just last month Woolworths announced it had increased its stake in Quantium – a data sciences and advanced data company aimed at helping the company 'improve its decision making capabilities across pricing, ranging and promotions.
IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.
The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.
Please see important Research Disclaimer.
Live prices on most popular markets
Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.