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Coles Group Ltd COL

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Morningstar’s Analysis

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Supermarket Prices Are No Longer Going ‘Down Down’, but Don’t Expect Profit Margins to Expand

Analyst Note

| Johannes Faul, CFA |

Toilet paper is a hot commodity again, but our fair value estimates for narrow-moat Woolworths and no-moat Coles remain AUD 24.00 and AUD 13.20 per share, respectively. While shares in both supermarket operators screen as overvalued, we prefer Coles to Woolworths at current prices strictly based on relative valuations. Potential near-term catalysts for a re-rating of shares in Woolworths and Coles are disappointing earnings growth in fiscal 2022, and an easing of the-hunt-for-yield if interest rates were to rise.

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Company Profile

Business Description

Coles Group Limited is one of Australia's largest retailers, operating the second- largest supermarket chain behind market leader Woolworths, and is the country's third- largest liquor retailer. The group has an extensive store network of about 2,500 store outlets and roughly 80% of Australian live within a 10-minute drive from their nearest Coles store. The retailer employs some 110,000 people, who process over 20 million individual customer transactions a week. This compares with Woolworths processing almost 30 million customer transactions per week from Australia's population of 25 million.

800-838 Toorak Road, Hawthorn East
Melbourne, VIC, 3123, Australia
T +61 398295111
Sector Consumer Defensive
Industry Grocery Stores
Most Recent Earnings
Fiscal Year End Jun 27, 2022
Stock Type