Supermarkets were once ‘COVID winners’, so why is the Coles (ASX:COL) share price struggling amid Omicron?

Is this why the Coles share price has been suffering lately?
The post Supermarkets were once ‘COVID winners’, so why is the Coles (ASX:COL) share price struggling amid Omicron? appeared first on The Motley Fool Australia. –

Key points

The Coles share price previously performed well during COVID-19 outbreaks and lockdowns
However, the supermarket’s stock has slumped 9% since the emergence of the Omicron variant
The dip might be due to the pressures of COVID-19 and the absence of lockdowns

The Coles Group Ltd (ASX: COL) share price has been having a rocky few months lately.

That’s despite a resurgence of COVID-19 cases around Australia. While higher case numbers haven’t necessarily boosted supermarket stocks in the past, the Coles share price generally performed well through lockdowns in 2020 and 2021.

So, why are the supermarket’s shares slipping amid the Omicron outbreak? Let’s take a look.

How did Coles perform during previous outbreaks?

The supermarket giant reported a COVID-19-induced lift in sales for both financial year 2020 and financial year 2021.

The lift was spurred by at home consumption, as lockdowns saw more people sitting at dining tables rather than pubs.

Unsurprisingly, as The Motley Fool Australia has previously reported, the Coles share price was generally buoyed through lockdowns over the previous 2 years.

However, current outbreaks seem to be having the opposite effect.

What might be weighing on the Coles share price in the age of Omicron?

The COVID-19 Omicron variant was first noted in South Africa in late November and quickly spread around the globe.

Since the variant’s emergence, the Coles share price has slumped 9%. There are three notable happenings – aside from Omicron itself – that could correlate to the supermarket’s slump.

The first is the Prime Minister’s resolve to stop locking down in the face of the pandemic.

On 20 December, Prime Minister Scott Morrison told a press conference “we’re not going back to lockdowns”. Morrison stated:

[O]ne of the key messages is, yes, we’re going to need to continue to calibrate how we manage this virus and how we live with this virus in the face of Omicron… we’re not going back to shutting down people’s lives.

Other news that might have put pressure on the Coles share price came from its major competitor, Woolworths Group Ltd (ASX: WOW).

It released an update on the first half of financial year 2022 on 14 December. Within the update, Woolworths CEO Brad Banducci described the period as “one of the most challenging halves we have experienced in recent memory”.

Woolworths’ challenges were brought on by COVID-19’s Delta strain, which impacted the supermarket’s stock flow and caused increased operating costs.

Market watchers might be assuming such impacts haven’t waned amid the Omicron outbreak.

Finally, the Coles share price might be being weighed down by now-routine COVID-19 impacts that have been reintroduced, such as product limits.

Additionally, the ABC reported last week that around 30% to 35% of Coles’ distribution centre’s staff and about 10% of its in-store staff were absent due to COVID.

That’s likely putting pressure on its supply chain and store network.

The post Supermarkets were once ‘COVID winners’, so why is the Coles (ASX:COL) share price struggling amid Omicron? appeared first on The Motley Fool Australia.

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Motley Fool contributor Brooke Cooper 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 owns and has recommended COLESGROUP DEF SET. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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