Coles launches new collectables! Is the Coles share price a buy?

The Coles Group Ltd (ASX: COL) share price has been a pretty decent performer over the last few months. Since 14 May, Coles shares have risen almost 20%, which includes making a new all-time high of $18.32 earlier this month. At the time of writing, the Coles share price is going for $17.96, which translates into a price-to-earnings (P/E) ratio of 20.2 and a trailing, fully franked dividend yield of 2.34% (3.34% grossed-up).

Coles is a consumer staples giant that investors flocked to when the coronavirus pandemic first struck. Although panic buying and the now-infamous hoarding of household essentials boosted Coles’ sales in March and April, things have arguably quietened down for the supermarket chain. So is the Coles share price still a buy today?

Coles launches new range of collectables

According to reporting in today’s Australian Financial Review (AFR), Coles is poised to launch a new range of collectables. Coles’ first foray into collectables came a few years ago in the form of the ‘Little Shop’ toys. It was a raging success and prompted a ‘collectables’ war with arch-rival Woolworths Group Ltd (ASX: WOW) that lasted until the start of this year. With the pandemic taking over priorities at Coles, it’s been radio silence for a while on any new collectables range. Until now.

The AFR reports that Coles’ new campaign will come in the form of pocket-sized children’s books. These will be produced in partnership with beloved children’s author Andy Griffiths and illustrator Terry Denton. The series will reportedly ‘draw inspiration from the award-winning Treehouse series’.

There will be 24 books in the series, including (of course) 4 ‘rare’ editions. Customers will be eligible for a ‘free’ book if they spend $30 or more in a single Coles shop.

The pocketbooks follow Coles’ Little Shop and Little Shop 2 promotions of recent years, as well as Woolies’ Lion King ‘Ooshies’ and ‘Secret Garden’ plant campaigns.

Is the Coles share price a buy today?

I think Coles’ new campaign could be a success for the company. I believe there’s a reasonable chance that branching out into books might be a hit with educationally-minded parents and collectable-loving kids alike.

However, just because Coles’ new program might hit the right note with consumers, this doesn’t mean Coles shares are necessarily a buy today. From where I’m standing, the Coles share price is at least being priced at fair value right now, and possibly even at a premium given its defensive nature as a business. A 2.34% dividend yield isn’t something to write home about either, in my view.

Further, with this announcement, it’s highly likely Woolworths will be dreaming up a rival scheme of its own, which could steal the wind from Coles’ sales, just like it did with the Ooshies toys.

Foolish takeaway

I think Coles is a solid business and certainly has a place in a diversified dividend portfolio. But I’m not too excited about the Coles share price or dividend potential right now. This new collectables campaign (even though it could be a hit) doesn’t change my mind on this thesis.

More reading

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• 5 steps to start investing in ASX shares

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of COLESGROUP DEF SET and Woolworths Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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