Coles Group Ltd (ASX: COL) has reported strong financial results for FY24, and the company's shares are generating significant interest. The supermarket giant's performance has been noteworthy, with the Coles share price rising 16% over the past year, outpacing its competitor Woolworths Group Ltd (ASX: WOW), which has seen a decline of nearly 6% in the same period.
Strong Financial Performance
Coles’ FY24 results highlight the company’s solid performance across various metrics:
- Revenue: Increased by 5.7% to $43.6 billion on a 52-week basis.
- Underlying EBIT: Rose by 7.3% to $2,175 million.
- Underlying NPAT: Grew by 4.1% to $1,210 million.
- Earnings Per Share (EPS): Improved by 2.1% to 84.6 cents.
- Dividends: The company declared a final dividend of 32 cents per share, bringing the total FY24 dividends to 68 cents per share.
These results exclude Coles Express, which was divested during the financial year. The figures are based on a 53-week fiscal year for Coles' retail trading calendar, with prior year comparisons adjusted to a 52-week basis.
Supermarkets Division Performance
The Supermarkets division showed notable growth:
- Revenue: Increased by 4.3% to $39 billion.
- Underlying EBIT: Grew by 10.5% to $2,125 million.
The division benefited from a focus on value and product availability. Notably, the Exclusive to Coles range and eCommerce platforms contributed significantly to this growth. Initiatives like Simplify and Save to Invest provided financial benefits of $238 million and a 44 basis points improvement in loss rate during the second half of FY24.
Liquor Segment and Investments
The Liquor segment saw modest sales growth of 0.5% to $3.7 billion, though underlying EBIT declined by 13.9% due to reduced discretionary spending among customers. Coles also made strategic investments, including the acquisition of two automated milk processing facilities from Saputo Dairy Australia and 20 Liquor retail stores in Tasmania.
Management’s Perspective
Coles Group CEO Leah Weckert commented on the results, emphasizing the company's commitment to delivering value to customers amid financial pressures. Weckert highlighted efforts to improve availability, quality, and digital offerings, while also focusing on cost management and completing key infrastructure projects such as the automated distribution center (ADC) and customer fulfillment centers (CFCs).
Outlook for FY25
Looking ahead to FY25, Coles is optimistic about its prospects:
- Supermarket Revenue: Increased by 3.7% in the first eight weeks of FY25, driven by successful Winter of Sports campaigns. The popularity of Coles Finest range and convenience meals is expected to continue benefiting the company.
- Liquor Sales: Experienced a slight decline of 1.4% in the first eight weeks, primarily due to a CrowdStrike outage in July. Excluding this impact, sales were down by 0.3%.
- Expansion Plans: The company plans to open eight new supermarket stores, close five, and renew approximately 50 stores. Similarly, it aims to open 13 new liquor stores and close 10.
CEO Weckert also expressed confidence in Coles’ ability to leverage its transformation investments to enhance efficiency and customer experience, while continuing to address cost-of-living pressures through value-focused pricing and promotions.
Valuation Compared to Peers
Coles shares are currently valued at a price-to-earnings (P/E) ratio of 22x based on FY25 earnings estimates. For comparison:
- Woolworths Group Ltd (ASX: WOW) shares are valued at a forward P/E of 25x.
- Metcash Ltd (ASX: MTS) shares are valued at a forward P/E of 13x.
- Wesfarmers Ltd (ASX: ASX:WES) shares are valued at a forward P/E of 31x.
Coles shares closed at $18.46 on Monday, reflecting strong performance and promising future prospects.