The Coles Group Ltd (ASX: COL) share price is one to watch after reporting its FY21 result. It’s cementing its status as a solid ASX dividend share.
What did Coles report in FY21?
The supermarket giant reported an increase of total sales of 3.1% to $38.56 billion.
That revenue growth is broken into 9.6% growth of supermarket revenue to $33.8 billion, 15.1% growth of liquor revenue to $3.5 billion and 13.8% growth of Express sales to $1.2 billion.
Group e-commerce sales amounted to $2.1 billion. E-commerce sales went up by 52% for the year, with e-commerce sales to consumers/the public up 60%. It opened three liquor e-commerce ‘dark stores’ during the year. That’s where the stores are just used to fulfil online orders.
Coles experienced operating leverage throughout the business, which saw profit rise faster at each level of the financial accounts.
Total EBITDA (EBITDA explained) grew by 5.4% to $3.4 billion, total EBIT rose 6.3% to $1.87 billion and net profit after tax (NPAT) went up 7.5% to $1.01 billion. The ‘smarter selling’ strategy led to benefits of approximately $300 million in FY21. This is where the business is trying to do things better and more efficiently throughout the business.
Profit/earnings per share (EPS) also rose 7.5% to 75.3 cents. The board left plenty of profit left in the business for investing with its dividend declarations.
Coles dividend and balance sheet
The board declared a final dividend per share of 28 cents per share, amounting to a 1.8% increase.
That brings the total dividend per share to 61 cents, an increase of 6.1% after strong increase in HY21.
Coles’ balance sheet ended with net debt of $0.4 billion. Management said it has capacity for future growth plans.
Trading update
Year on year, in the first seven weeks of FY22, supermarket sales were up 1% and liquor sales were flat.
The company said that during FY22 it will be cycling against the sales and cost impacts of COVID, particularly the extended lockdown in Victoria, though there are lockdowns in several places in Australia currently.
Coles is expecting to spend on capital and operating costs significantly in FY22 to improve efficiencies. It’s also continuing the build for the two Witron automated distribution centres – $290 million of costs here will be incurred in FY22.
Summary thoughts on Coles and the share price
Coles is doing the right things to try to maintain and grow its market share. Online sales continue to be an important factor. Its seller smarting strategy may mean it can reduce the gap to Woolworths Group Ltd (ASX: WOW).
In terms of profit growth, selling food to people isn’t exactly going to be a booming growth sector from here. But it could steadily grow profit bit by bit, leading to a higher dividend. And supermarkets is a very defensive industry.
Coles currently has a fully franked dividend yield of 3.3%. Not bad. However, there are other ASX dividend shares that may be able to produce stronger growth over time. But Coles could be a decent blue chip play.
