Coles half-year results: a pithy effort amid cycling elevated sales and covid

Coles (ASX: COL) has delivered a pithy half-year result as the company cycles through elevated sales and volatile business conditions. Coles stock was flat as the market opened, now 3.3% higher.

Financials at a glance 

• Revenue of $20.6bn, up 1% 

• Net profit of $549m, down -2% 

• Interim dividend of 33 cents per share, flat on last year

The profit figure beat Bloomberg estimates of $506m and Bell Potter forecasts of $538.4m. 

Lockdowns prop up at-home consumption

Coles achieved comparable supermarket sales growth of 1.5% for the first-half, cycling the elevated 7.2% sales growth from the first-half of FY21. 

Coles experienced elevated sales in the first quarter and in the early part of the second quarter as a result of lockdowns across NSW, ACT and Victoria. 

Sales again increased in the lead up to Christmas as families celebrated the holidays together. 

Costs under control

Coles incurred covid-related costs of approximately $150m, up from $105m in the previous period. 

The company exhibited solid cost control, with gross margins improving 20 basis points to 26.1%. 

Coles said that supply chain and loss prevention initiatives partially offset covid costs in the first half.

Outlook

Coles said the spread of omicron elevated supermarket sales in early January, before moderating later that month.

The company flagged a "significant variation" in sales performance between states and store locations, as a result of covid and floods in South Australia.

Initial impressions

Ord Minnett reiterated a Hold rating with a $17.80 target price (circa 3% upside).

Ord Minnett's initial impression was that both earnings and dividends were head of forecasts.

Coles exhibited encouraging cost control alongside a lower full-year capital expenditure program.