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Coles Group Is back on the ASX for the first time since 2007, when Wesfarmers acquired it, and WesfarmersÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢ half a million shareholders will be wondering what to do with their new Coles shares.


Many Coles shareholders will also own Woolworths shares, raising the question of whether to own both or, if not, which one.


Both stocks have a role in conservative portfolios as long as they do not become overvalued. I prefer the Woolworths business for its wider profit margins, lower gearing and what is in general a more developed strategy. IÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢d also suggest Woolworths is making greater progress towards optimising its operations and creating a more efficient ÃÆâ€â„¢ÃƒÆ’ƒÂ¢Ãƒ¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡ÃƒÆ’â€Å¡Ãƒƒâہ¡ÃƒÆ’‚­supply chain.


Importantly, with a looming change to franking credit entitlements if the ALP wins power, Woolworths also has surplus franking credits and is set to ÃÆâ€â„¢ÃƒÆ’ƒÂ¢Ãƒ¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡ÃƒÆ’â€Å¡Ãƒƒâہ¡ÃƒÆ’‚­receive $1.7 billion from selling its fuel business early next year, most or all of which will be returned to shareholders.


These advantages are reflected in market pricing: Woolies at $29.23 trades on about 20 times earnings, while Coles, at $11.50, is closer to 16 times. Both stocks are fairly priced for the moment.


But Coles will catch up in coming years if management executes well. Recent history suggested that demerged companies tend to perform well as investments ÃÆâ€â„¢ÃƒÆ’ƒÂ¢Ãƒ¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡ÃƒÆ’â€Å¡Ãƒƒâہ¡ÃƒÆ’‚­because their businesses finally receive enough board and management time, capital and growth ambition after languishing as non-core or discontinued inside the former parent company.


Food retail contributes more than 80 per cent of ColesÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢s earnings, so the stock is almost a pure play. Revenue growth is likely to match the sectorÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢s low single-digit revenue growth. Liquorland has a solid market position with adjacency to Coles supermarkets, so convenience will drive performance in liquor.


Flat profit margins can be expected near term with only incremental longer-term upside given some of the efficiency gains from consolidating distribution centres and cost savings at the store level will be competed away.


But Coles has advantages over independents in scale and vertical integration, so ongoing market share gains are likely. Assuming consistent execution, Coles could increase earnings at a low to mid-single digit rate.


The prominence of both Coles and Woolworths increases the pressure on them to price competitively but rationally (at a profit). Coles joins the ASX as its 20th largest stock by market capitalisation and Woolworths is in the top 10, so both stocks will be in most large pooled superannuation funds and also many self-managed funds. Both groups have a role in growing AustraliansÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢ retirement assets and providing rising franked dividend income to all investors, but ÃÆâ€â„¢ÃƒÆ’ƒÂ¢Ãƒ¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡ÃƒÆ’â€Å¡Ãƒƒâہ¡ÃƒÆ’‚­especially those depending on ÃÆâ€â„¢ÃƒÆ’ƒÂ¢Ãƒ¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡ÃƒÆ’â€Å¡Ãƒƒâہ¡ÃƒÆ’‚­investment income to fund their retirements.


As for new competition Costco and Kaufland do not appear to be significant competitive threats because they will have relatively few stores nationally.


Online grocery ordering and delivery is a longer-term story. It will take time for supermarket chains to make online food retail profitable enough to be worth scaling, and the chains will not want to cannibalise sales through their physical stores


clime asset management
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  • 1 month later...
Coles revealed on Thursday the cost of the two new state-of-the-art automated distribution centres it will build, at Redbank in south-west Brisbane (with Goodman Group) and at Kemps Creep in western Sydney (with a joint venture between Goodman and Brickworks).


Total capital expenditure will come in at $950 million over six years; Coles had already said it expects capex will come in between $600 million and $800 million for the 2019 financial year, which will include some contribution towards the distribution centres (DC).


The company will also take a $146 million provision in its December-half results to be delivered on February 19, relating to costs associated with exiting leases on its existing distribution centres.


Wesfarmers announced the DC spend in October, when it released the scheme of arrangement documents for the Coles demerger. But much to the annoyance of several analysts, Wesfarmers didn't put a price tag on the projects.


BAML analyst David Errington and Citi's Craig Woolford questioned whether Coles will be able to afford its forecast dividend payout ratio of 80 per cent to 90 per cent of profits when it is spun out of Wesfarmers in November, given an expected increase in capital expenditure.

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in a world first, Uber Eats has established a partnership with supermarket chain Coles to deliver ready-to-eat and ready-to-heat meals to time-poor consumers.


Coles and Uber Eats, the largest player in the online takeaway food-delivery market, kicked off a pilot program on Tuesday enabling customers in the Sydney suburb of Pagewood to order ready-made and semi-prepared meals from Coles through the Uber Eats app.


A dedicated team in Coles will pick the orders from supermarket shelves and hand them to Uber Eats drivers, who will deliver the orders to homes or workplaces in less than 30 minutes for a $5 delivery fee.

.. time poor, or can't find a park?
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  • 2 months later...
"Over 5 million Australians would now consider buying groceries online in the next 12 months âââہ¡Ãƒâ€šÃ‚¬ÃƒÆ’¢Ã¢Ã¢â‚¬Å¡Ã‚¬Ãƒâ€¦Ã¢â‚¬Å“ just under a third of Australian grocery shoppers. The market is there for the taking however thus far consumers havenâââہ¡Ãƒâ€šÃ‚¬ÃƒÆ’¢Ã¢Ã¢â€š¬Ã…¾Ãƒâ€šÃ‚¢t been convinced by the online grocery services on offer. Just 4% of grocery shoppers buy their groceries online in an average month equivalent to about 600,000 Australians."


âââہ¡Ãƒâ€šÃ‚¬ÃƒÆ’…âہ“Although the gap between interest in online grocery shopping and the follow through remains significant, and has persisted for several years, there have been significant developments in the Australian grocery and food markets in recent months and there are more coming."

Michele Levine, CEO Roy Morgan Research


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alonso - does sound like you're not a seasoned shopper. Both Woolies and Coles work on weekly cycles starting each Wednesday. If you stick to buying special deals from them and do a bit of stockpiling the Coles/Woolies portion of your grocery bills can be reduced by 40 or 50%. Lots of people shop on Wednesdays for that reason (Aldi also puts specials out on Wednesdays and Saturdays). Then you have the pensioners and other welfare recipients (and public servants?) that get their money on a Thursday and of course the double income families have little choice but to shop on weekends. Tuesdays are at the end of that cycle so yeah the supermarkets can go a tad quiet. (I've never actually seen stats to back all this up but generally speaking Tuesdays are the quiet day in retail). :rolleyes:
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Maybe you're right. On the other hand I often go into Woolies, any day of the week, for those impulse needs, and it's always reasonably busy.


Getting out is the hard part, with the checkouts usually occupied by the full basket people and the robots queued up.




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