The Coles Group Ltd (ASX: COL) share price is under the spotlight after reporting its FY25 first-quarter revenue.
Coles FY25 first quarter
The supermarket company reported that its total group sales rose by 2.9% to $10.55 billion.
Within that figure, supermarket sales increased by 3.5% to $9.5 billion, liquor sales decreased by 4.4% to $851 million and ‘other’ sales declined by 11.2% to $190 million. Excluding tobacco, supermarket sales grew 4.9%.
Coles revealed that its supermarket e-commerce sales increased 22.4% to $1.04 billion and liquor e-commerce declined by 1.9%. E-commerce penetration is now 10.8% of supermarket sales, with a continued improvement in customer satisfaction for online orders.
The company said it has been focused on value through the Winter and Spring value campaigns. It also noted that Flybuys active members rose by 4.1%, with 21.3% growth in members participating in personalised value offers.
Coles also reported that it has progressed the transition of next-day home delivery orders to its automated customer fulfillment centres (CFCs) in Melbourne and Sydney resulting in a “significant uplift in perfect order rates”.
Inflation
There has been a lot of commentary on inflation in the last couple of years, including attention from the ACCC.
Coles’ supermarkets reported total inflation of 1.5%, or 1% excluding tobacco. Excluding tobacco and fresh, inflation was only 0.1%.
The company said the inflation reduction was largely attributable to comparing against elevated CPI requests in the prior corresponding period.
Fresh produce inflation increased as it cycled “strong growing conditions and surplus produce last year.” Meat prices continued to deflate as a result of lower livestock prices. Dairy also moved into deflation during the quarter as a result of ‘value investments’, particularly with Coles own brand cheese, as did homecare and health and beauty, according to Coles.
Outlook for the Coles share price
Coles said in the early part of the second quarter, supermarket revenue has remained “broadly in line” with the first quarter with volume growth supported by the investments it has made in value for customers.
In liquor, revenue growth remains “subdued” with the business focused on providing value.
Coles announced an agreement to construct its third automated distribution centre (ADC), which will be located in Truganina in Victoria, following the ADCs in Queensland and NSW. The Victorian project is expected to commence during FY25, so capital expenditure is expected to increase to approximately $1.3 billion this financial year (up from $1.2 billion).
I think Coles is a solid business and I’d be happy to own it for the long-term due to its profit and dividend growth over time. However, it’s not as cheap as it was earlier this year, so other ASX dividend shares may be appealing.
