This article expresses my thoughts exactly...How did the Coles...

This article expresses my thoughts exactly...

How did the Coles (ASX:COL) share price respond last earnings season?

Coles reports its FY21 earnings tomorrow….

The Coles Group Ltd (ASX: COL) share price has had a fairly wild day of trading already this Tuesday, even though it’s only lunchtime.At the time of writing, Coles shares are going for $18.34, down 0.86%. However, soon after open today, Coles shares were up to $18.60 at one point. It seems investors are having some difficulties working out what to do with Coles today.

And perhaps fair enough. This supermarket giant reports its full-year earnings for FY2021 tomorrow morning so I’m sure the anticipation is giving some investors itchy fingers today.

So with Coles’ earnings just around the corner, it’s probably a good time to check out how the Coles share price reacted to its last earnings report that it delivered back in February of this year.

At that time, Coles reported its half-year update on 17 February and it caused quite a stir at the time. Here’s a summary of what Coles reported back then:

• 8% increase in revenues to $20.57 billion
• Earnings before interest and tax (EBIT) rising 12.1% to $1.02 billion
• Net profits up 14.5% to $560 million.
• Rise in interim dividend of 10% to 33 cents per share.

Despite the fact that the numbers above point to a successful half-year for Coles, investors didn’t share that view. As we reported at the time, the Coles share price was actually hammered after these results were released, falling 6% by mid-afternoon.

By the next day, the Coles share price had lost more than 10%. 10 days later, it was down 15% from where it was pre-earnings.

So what didn’t investors like in this earning report.

What happened to the Coles share price?

Well, it seems a statement from management about the company’s future sales really spooked investors 6 months ago. Here’s what Coles management said at the time: "Depending on COVID-19, vaccine roll out and efficacy, and other factors, sales in the supermarket sector may moderate significantly or even decline in the second half of FY21 and into FY22. Coles will be cycling elevated sales from COVID-19 in Supermarkets late in the third quarter, for the remainder of the second half, and most of FY22."

That didn’t exactly fill investors with confidence and the Coles share price remained under pressure for some time after this earnings report went public. In fact, the Coles share price didn’t recover to its early February levels until around a week ago.

So Coles shareholders will no doubt be hoping for a different reaction from the markets when the company delivers its full-year results tomorrow. It will certainly be interesting to see how management sees the current trading environment for Coles in light of the recent country-wide lockdowns.

At the current Coles share price of $18.34, the company has a market capitalisation of $24.4 billion, a price-to-earnings (P/E) ratio of 23.3 and a trailing dividend yield of 3.3%, fully franked.