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Coles share price reaches 3-month high after strong Q3 results

Australia's grocery giant Coles Group has posted a pickup in Q3 sales growth driven by its strong collectible promotions.

Coles posted a 3.2% rise in Q3 supermarket sales, and strong sales on the “Fresh Stikeez” campaign.

The Fresh Stikeez campaign, which offers mini collectible toys of fruits and veggies for every A$30 spent, drove Q3 sales growth.

Coles share price

Coles share price jumped to thee month highs after the supermarket reported its sales grew 2.2% in Q3, compared to 1.5% in Q2.

Coles shares rose 0.2% by mid-session on Monday, while the broader market fell 0.3%. Shares rose as much as 0.8% to A$12.70, hitting a near three-month high.

Stocks have risen 7.3% this year, with a 12.9% increase in the S&P/ASX200 benchmark index.

Strong competition

Coles and rival Woolworths have been in cut-throat competition in the sector for years, as they have been in battle for the majority market share.

Coles has taken competition head on by refreshing the collectables promotion, which proved to previously lift sales in 2018.

Investors worry that the boost in sales due to the promotion, won’t last long.

Promotion boosts sales

The promotion lifted comparable sales growth, adjusted, to 2.2% from 1.5% in the second quarter. While in the September quarter, sales growth doubled to 5.1%

‘We didn't expect it to be of the same magnitude,’ Coles CEO Steven Cain told journalists on a conference call, citing a similar campaign launched at Woolworths.

Coles' total sales, which comprises supermarkets, liquor and fuel and convenience retail businesses, fell to A$8.88 billion from A$9.05 billion last year.

‘What is quite apparent is there might be some promotional fatigue out in the marketplace,’ he said, though adding that marketing ideas, such as collectables, were more effective than traditional discounting promotions at driving sales.

The collectables have been listed for re-sale for thousands of dollars due to popularity.

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