Stock of the day: Coles

(AI video summary)

This video was created on 30 April for IG audiences by ausbiz.

ASX code: COL

Coles' supermarket growth drives revenue

Coles Group has reported third-quarter (Q3) sales revenue of $10.4 billion, up slightly from $10 billion in the corresponding period last year. The supermarket segment generated $9.4 billion, a 3.7% increase. Coles's chief executive officer (CEO) Leah Weckert credited the results to investments in customer experience both in-store and online. Electronic commerce (e-commerce) performance was particularly strong, with online supermarket sales growing by 25.7%.

Defensive positioning in markets

Supermarkets are viewed as defensive stocks, performing well during market volatility. Both Coles Group and Woolworths Group have served as safe havens for investors during market uncertainty. While Coles' liquor division underperformed expectations, indicators suggest a strong start to the fourth quarter (Q4). The Kemps Creek facility's operations have been particularly successful.

Investment considerations

At $21.22, Coles appears fully valued according to analysts. The stock has appreciated significantly from previous lows of around $19.50, suggesting limited upside. Similarly, Woolworths trades at $31.32, also representing substantial recovery. Both supermarkets operate in a concentrated Australian market where they typically alternate as sector outperformers.

Political considerations may affect the sector during election cycles, a risk factor for potential investors. For those looking at the retail sector, better opportunities may exist in companies that have experienced corrections and offer better market value. Currently, both Coles and Woolworths are viewed as "hold" recommendations.