What to expect from Coles and Woolworths Q1 results

As the Q1 results for both Woolworths (WOW) and Coles (COL) loom, we take a look at what analysts are thinking and what the companies themselves have said on their outlook.

Coles share price: recent moves at a glance

Coles (ASX: COL) is set to release its first quarter FY20 sales results on October 29, 2019.

It will be interesting to see how the market reacts to these results, given the already-strong performance of the Coles share price over the last ten months. For reference, while the ASX 200 has risen just 20% in that time, Coles has steadily outpaced such gains, running up 27% since January.

For such a large enterprise Coles reported good sales growth in FY19, with revenue rising 3% to A$35.0 billion. The company also noted that it had delivered its:

‘47th consecutive quarter of Supermarkets comparable sales growth.’

FY20 guidance in focus

During Coles’s FY19 results, the company gave some broad indications of what investors could expect from FY20 as well as the first quarter itself. For instance, it was noted that:

‘By way of a Q1 FY20 trading update, Little Shop 2 has again resonated with our customers and is driving strong engagement. As envisaged, cycling the comparable sales growth from last year’s highly successful Little Shop campaign will be challenging given competitor activity in the market.’

For reference, Woolworths’s analogous product offerings are Lion King collectibles.

In addition to this and taking a longer-reaching view, Coles management commented that:

‘The Smarter Selling initiatives in FY20 are anticipated to deliver annualised benefits in excess of $150 million.’

Investors will likely be keen to see how – if at all – these benefits, as well as the concept of ‘engagement’ has factored in Coles’s Q1 FY20 top-line sales growth.

The analyst take

Overall, analysts have taken a relatively cautious view on Coles (ASX: COL) – assigning it a consensus hold rating. Of the 14 analysts covering the stock, two rate it a buy, one rate it overweight, six rate it a hold, two rate it underweight and three rate it a sell, according to the Wall Street Journal.

At Coles’s size: growth is hard to come by, after all.

Woolworths and the street

Woolworths (ASX: WOW) is set to announce its Q1 FY20 sales results one day after Coles – on October 30, 2019.

Woolworths, like Coles, has seen its share price run ahead of the broader market year-to-date – rising 28% in that period. Yet this comparable share price performance has not equated to a comparable analyst consensus view.

Overall, the analyst consensus is lower for Woolworths than it is for Coles, with a consensus underweight rating. Of the 13 analysts covering Woolworths, two rate it a buy, four rate it a hold and an overwhelming seven rate it a sell, according to the Wall Street Journal.

Woolworths share price

Such uncertainty from analysts seems well reflected in Australia’s equally uncertain economic climate. Indeed, this was a core part of the outlook provided by the Woolworths CEO during the company's recent full-year results.

Here, it was noted that:

‘In F20, we expect the uncertain consumer environment and input cost pressures to remain as well as an impact from new enterprise agreements. We are well placed to respond to these challenges and are excited about what we can achieve together in F20.’

Indeed, Australia’s GDP growth remains weak and household indebtedness high, though the RBA’s hope that lower interest rates would/ will spur growth – though not realised yet – remains hopeful.

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This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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