Coles’ result fell short of the broker on higher supermarket costs and lost market share in the second quarter. Liquor did well and cash flow was otherwise strong but margins compressed.
The CEO has announced a “strategy refresh” due to a negative outlook, which the broker assumes means spending money. The broker is positive on the grocery sector in FY19-20 but negative on Coles specifically given required investment and retains Sell, while maintaining Buys on the other two listed supermarkets. Target falls to $11.30 from $11.70.
Sector: Food & Staples Retailing.
Target price is $11.30.Current Price is $11.74. Difference: ($0.44) – (brackets indicate current price is over target). If COL meets the UBS target it will return approximately -4% (excluding dividends, fees and charges – negative figures indicate an expected loss).
