
Coles Group Ltd (ASX: COL) is one of Australia’s best-known shares, and I think there is plenty to like about its long-term prospects.
But would I put $10,000 into Coles shares today?
There are three reasons I would consider it.
Defensive demand
The first is the nature of Coles’ business. Groceries are an essential part of household spending, and that gives Coles a level of resilience that many other retailers simply do not have.
Even when consumers are struggling financially, they still need to buy food and everyday essentials.
They might switch to cheaper products, look for more specials, or reduce discretionary purchases, but supermarkets should continue seeing relatively consistent demand.
I think that makes Coles a good business to own through different economic conditions.
Its national store network, established supply chains, and growing online business also give it considerable scale.
Of course, competition remains intense, particularly from Woolworths Group Ltd (ASX: WOW) and Aldi. But Coles has continued investing in its customer offering, and I think it is well positioned to defend its place in the market.
Some protection against inflation
My second reason is Coles’ ability to manage inflation.
Coles has the ability to adjust its prices when the costs of purchasing and distributing groceries increase, giving it a degree of protection against inflation.
In addition, Coles’ investment in automation could become increasingly important.
Its automated distribution centres and improved fulfilment capabilities should help make operations more efficient, reducing some of the cost pressures associated with running a large supermarket network.
If Coles can keep improving productivity while remaining competitive on price, I think that will put it in a stronger position to protect its profit margins.
A positive earnings outlook
The third reason I would consider investing $10,000 in Coles shares is the growth expected over the next few years.
Coles generated earnings per share (EPS) of 81.5 cents in FY26.
Consensus forecasts point to EPS increasing to 98.2 cents in FY27, $1.05 in FY28, and $1.15 in FY29. That would represent earnings growth of approximately 41% over three years.
I think that is a strong outlook for a business operating in such a mature industry.
The dividend is also expected to benefit. After paying a fully-franked 78 cents per share in FY26, analysts expect Coles to increase its annual payout to 83.5 cents in FY27, 88.8 cents in FY28, and 97.4 cents in FY29.
With Coles shares trading around $23.70 on Wednesday, the FY27 forecast represents a dividend yield of approximately 3.5%, before franking credits.
I think that provides a good income component alongside the prospect of further capital gains.
Foolish takeaway
I would be happy to invest $10,000 in Coles shares at current levels.
I like the resilience of its supermarket operations, the opportunity to improve efficiency, and the earnings growth analysts are expecting.
For me, Coles looks like a business that could deliver solid returns over the coming years while remaining a dependable long-term holding.
The post 3 reasons I would invest $10,000 in Coles shares appeared first on The Motley Fool Australia.
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Motley Fool contributor Grace Alvino has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

