The Coles Group Ltd (ASX: COL) share price was a market beater in 2020.
The supermarket giant’s shares recorded a gain of 22.2% over the 12 months.
This compares to a 1.4% decline by the S&P/ASX 200 Index (ASX: XJO).
Why did the Coles share price smash the market in 2020?
Investors were fighting to get hold of the supermarket operator’s shares last year due to its strong performance during the pandemic.
Thanks to its strong market position, defensive qualities, and essential service status, Coles delivered a robust full year result in FY 2020.
For the 12 months ended 30 June, Coles reported sales revenue growth of 6.9% to $37.4 billion. This was driven by growth across all segments and particularly strong comparable store sales growth across the Supermarkets business.
In respect to earnings, Coles delivered earnings before interest and tax (EBIT) of $1,387 million and a net profit after tax of $951 million. This represents a 4.7% and 7.1% increase, respectively, over the prior corresponding period.
Its earnings would have been stronger were it not for a one-off increase in investment in COVID-19 related expenses.
Also growing strongly was its dividend. A fully franked final dividend of 27.5 cents per share was declared. This was an increase of 14.6% on the prior corresponding period and lifts its full year dividend to 57.5 cents.
Strong form continues in FY 2021.
Pleasingly, Coles’ strong form has continued into FY 2021 and another solid result is expected this financial year.
For the three months ended 30 September, Coles reported a 10.5% increase in total sales revenue over the prior corresponding period to $9.6 billion.
The key driver of the company’s growth during the first quarter was its Supermarkets business.
It reported comparable sales growth of 9.7% for the three months and online sales growth of 57%. This led to the Supermarkets business recording a 9.8% increase in sales to $8,464 million.
This was supported by strong growth from its Liquor business. It delivered comparable sales growth of 17.8% and online sales growth of 57%. This resulted in first quarter Liquor sales of $852 million, up 17.4% on the prior corresponding period.
Management noted that its liquor sales remained elevated throughout the first quarter across all states despite the relaxation of on-premise consumption of liquor in some states.
Can the Coles share price go higher?
According to one leading broker, the Coles share price can still go higher from here.
Goldman Sachs currently has a buy rating and $20.50 price target on its shares. This price target implies potential upside of over 10% excluding dividends or ~13.5% including them.
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of COLESGROUP DEF SET. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
The post The Coles (ASX:COL) share price jumped 22% in 2020 (and could still go higher) appeared first on The Motley Fool Australia.
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