COL Coles
25 july 2026
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Over the last 5 years, Coles Group (ASX: COL) has delivered stable, defensive, and slow-growth performance. Net profit has remained anchored around $1.0B to $1.1B annually, revenue has grown steadily to $44B, debt remains highly leveraged due to long-term lease liabilities, and ROE has consistently hovered between 26% and 37%. [1, 2, 3, 4, 5]
A breakdown of the key financial metrics over the past five years highlights specific trends:
1. Revenue and Profit
- Revenue: Grew steadily from $39.4 billion in FY2021, hovering around $44.5 billion heading into 2026, driven by consistent supermarket and e-commerce sales. [1, 2, 3, 4]
- Net Profit (NPAT): Remained firmly resilient but largely flat. After-tax profit fluctuated in a tight range: peaking at $1.12 billion in FY2024 and landing at $1.08 billion in FY2025. Coles posted about $1.01B in profit over the trailing 12 months, impacted by normalization from previous years. [1, 2, 3, 4, 5]
- Margins: Profit margins remained characteristically thin but stable, with net profit margins sitting between 2.4% and 2.7%. [1]
2. Debt
- Debt to Equity: Appears very high, generally ranging between 228% and 272%. However, this is largely attributed to retail property/store lease liabilities (which are counted as debt under AASB 16 accounting standards) rather than aggressive corporate borrowing. [1, 3, 4, 5]
These are the D/E ratios for the last 5 years:
2026 - 2.72
2025 - 2.71
2024 - 2.78
2023 - 2.67
2022 - 3.13
3. Return on Equity (ROE) & Financial Health
- ROE: Historically high and excellent for a defensive retailer, consistently averaging between 26% and 35%. It peaked at around 37% in FY2021 and was recorded at 26.5% heading into early 2026. [1, 2]
- Cash Flow: The company generates strong, reliable operating cash flow and free cash flow (consistently over $1.1 billion annually), allowing for stable and growing dividend distributions. [1]
4. Share Price & Dividends
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PE Ratios
The mean historical Price-to-Earnings (P/E) ratio of Coles Group Limited (ASX: COL) since its listing is 20.48x, while its current trailing twelve months (TTM) P/E ratio sits significantly higher at 30.63x. [1, 2]
Because Coles Group was spun off from Wesfarmers and re-listed as an independent entity on the ASX in November 2018, independent 10-year historical data does not exist prior to that date. [1]
Historical P/E Ratio Breakdown
The table below tracks the independent fiscal year-end or calendar year-end P/E ratios for ASX:COL:
| Year [1, 2, 3, 5] | P/E Ratio | Valuation Context |
|---|---|---|
| 2026 (Current TTM) | 30.63x | Driven by a strong rally in share price ($23.28) outpacing short-term EPS. |
| 2025 | 27.2x | Reflects premium valuation multiples as defensive consumer staples became highly favored. |
| 2024 | 20.3x | Normalized closer to Coles' long-term average trading band. |
| 2023 | 21.6x | Modest multiple expansion balancing post-pandemic supply chain adjustments. |
| 2022 | 20.5x | Stabilized valuation inline with historical baseline averages. |
| 2021 | 21.1x | Elevated demand metrics from pandemic-driven grocery volume spikes. |
| 2020 | 17.4x | Early independent trading year normalization patterns. |
| 2019 | 6.36x | All-time low right after the corporate spin-off due to initial restructuring distortions. |
| 2016 – 2018 | N/A | Coles operated internally under parent company Wesfarmers Ltd. |
Peer and Market Benchmark Comparisons
To put Coles' current 30.7x P/E ratio into perspective against competitors and the broader Australian market:
- Industry Average: The global and local consumer retailing industry averages approximately 16.1x.
- Direct Competitor: Wesfarmers Ltd sits closely at 31.9x.
- The Broader Market: The overall ASX Market P/E Ratio historically averages a much lower 17.2x. [1, 2, 3]
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ROIC Vs WACC
Coles Group (Coles Group (ASX:COL)) has consistently maintained a return on invested capital (ROIC) of roughly 6.6% to 11.1%, which comfortably exceeds its stable weighted average cost of capital (WACC) of roughly 5.1% to 5.3% over the past 10 years, indicating steady economic value creation. [1, 2, 3]
Return on Invested Capital (ROIC)
Weighted Average Cost of Capital (WACC)
- Recent Range: Current WACC estimates hover around 5.13% to 5.27%.
Economic Spread (ROIC vs. WACC)
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ARGO vs COL buffett style analysis Sept 2026
A Warren Buffett-style comparison between Argo Investments (ASX:ARG) and Coles Group (ASX:COL) requires looking beyond simple yields to analyze competitive moats, pricing power, capital allocation, and valuation multiples. [1, 2]
While Argo is a diversified Listed Investment Company (LIC) that functions like a conservative, multi-asset holding company, Coles is an operational giant dominating Australia’s consumer staples sector as a duopoly player. [1, 2]
| Metric | Argo Investments (ASX:ARG) | Coles Group (ASX:COL) |
|---|---|---|
| Trailing P/E Ratio | 26.6x | 28.8x |
| Gross Dividend Yield | ~4.2% (Fully Franked) | ~3.3% (Fully Franked) |
| 10-Year Total Return | ~9.0% p.a. | ~10.1% p.a. (Estimated since 2018 spin-off) |
| Dividend Growth Style | Stable, reserve-smoothed | Progressive, earnings-linked |
1. Long-Term Growth (The Economic Moat)
From a Buffett perspective, a company's long-term compounding ability relies heavily on its structural competitive advantage.
- Coles (The Operational Moat): Coles possesses a powerful consumer moat anchored in a near-impenetrable retail duopoly alongside Woolworths. It features massive economies of scale, immense supply chain infrastructure, and localized real estate dominance. Its long-term compounding is driven by population growth and structural inflation, which it handles cleanly via consumer pricing power. [1]
- Argo (The Institutional Moat): Argo’s moat is its structural longevity, ultra-low management fee structure (~0.14%), and conservative diversification across Australia's largest blue chips. It tracks closely with the broader S&P/ASX 200 Accumulation Index, giving you a steady macroeconomic cross-section of Australia rather than an independent operational engine. [1]
2. Price to Earnings (P/E) & Margin of Safety
Buffett famously avoids overpaying for growth, preferring intrinsic value upside.
- Argo (P/E 26.6x): For an asset wrapper (LIC), a 26.6x P/E is relatively high historically, reflecting the elevated valuation premium currently assigned to premium Australian blue-chip stocks. [1]
- Coles (P/E 28.8x): At 28.8x, Coles trades at a high-quality staple premium. Buffett frequently purchases consumer staples at high valuations (e.g., Coca-Cola, See's Candies) if their earnings are highly predictable and protected from technological disruption. Coles represents the higher-quality earnings stream, but lacks a deep value "margin of safety" at these pricing levels. [1]
3. Dividend & Dividend Growth (Capital Allocation)
Buffett evaluates dividends based on the efficiency of retained earnings.
- Argo (Smoothed Income): Argo distributes roughly 4.2% with a 10-year dividend growth average of 2.7% per annum. Its major advantage under Buffett's philosophy is its profit reserve mechanism. Argo retains profits during boom years to maintain or increase dividends during recessions, resulting in consistent, predictable baseline cash flow.
- Coles (Progressive Compounder): Coles yields a lower nominal 3.3% but offers structurally superior organic growth. Since spinning off from Wesfarmers, Coles has steadily expanded revenue and net profit margins to fuel consistent dividend hikes. Because its growth is tied to underlying revenue increases rather than broad stock market swings, its real dividend growth over the next decade is structurally positioned to outpace inflation more efficiently. [1, 2, 3, 4]
The Buffett Verdict
If Warren Buffett were analyzing these two options today:
- Coles would likely win on Business Quality. It is a simpler, capital-allocating business with a direct consumer relationship, structural pricing power, and an unmistakable economic moat.
- Argo would win on Systemic Risk Mitigation. It avoids single-company operational errors (e.g., regulatory fines or supply chain failures) by diversifying across the country's economic bedrock
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