Coles makes its debut on ASX

23 November, 2018 by Andy Young

The long-running Coles demerger has seen the supermarket giant finally make its debut on the Australian Securities Exchange (ASX), with an opening price of $12.49, beating the expectations of many analysts.

Over the course of its opening day those shares rose above $13, ultimately finishing the day on $12.75, with 5.7 million shares changing hands. Meanwhile shares in Wesfarmers, Coles’ former parent company fared less well, dropping by 27.7 per cent on Thursday to close at $31.96, with a further two per cent drop yesterday to $31.32.

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Wesfarmers now owns 15 per cent of Coles, with shareholders in the Perth-based conglomerate receiving one Coles share for each Wesfarmers they own.

Market analysts have given a mixed reaction to Coles’ listing, with Macquarie highlighting private label, fresh food and FlyBuys data as ways the supermarket could lift its earnings by three to four per cent in the coming years.

“We estimate every one per cent increase in private label increases Coles EBIT by one per cent,” Macquarie said.

However the company also said that it was concerned about what impact competitors including Amazon and Kaufland could have on the business, adding, “Kaufland would obtain about one per cent market share quite quickly diluting sector returns.”

The Australian reported Deutsche Bank’s Michael Simotas as being “a little cautious” about Coles’ near-term outlook.

“We believe Coles is in for a fairly challenging year of standing on its own two feet,” he said.

He added that heading into the key Christmas shopping period that the bank believed the momentum was actually with Coles’ big rival.

“Woolworths appears to have strong momentum into Christmas and is executing well, with sales likely to be boosted by Christmas cut-outs. This could make the key Christmas period challenging for Coles, particularly given it has been somewhat distracted in the lead up due to the demerger.”

The ASX-trading Coles business includes its supermarket, fuel and liquor businesses with Wesfarmers maintaining ownership of Bunnings, Kmart, Target and Officeworks.