Why has the Coles (ASX:COL) share price rallied 7% in a month?


The S&P/ASX 200 Index (ASX: XJO) had a pretty lousy day of trading this Tuesday. The ASX 200 ended up down by 0.73% and closed at just under 7,100 points. But no one seems to have told the Coles Group Ltd (ASX: COL) share price.

Coles shares had a corker of a day. The grocery giant finished up a healthy 1.14% at $17.71 a share. But what’s more interesting is that Coles is now up more than 7% in roughly the past month. Yes, between February 18 and today, Coles has gone from $16.55 a share to $17.71.

So what’s happened with this company recently?

Well, unfortunately, it’s not entirely clear.

But we can rule out the impact from Coles’ half-year earnings report. Although the report delivered what you could describe as a mixed bag, Coles shares were lower during the first few weeks of March than they were before the report was delivered on 22 February. So it doesn’t look like that’s made much of a lasting impression.

So let’s consider what might have been on investors’ minds since then. The past few weeks have seen a renewed focus on inflation, which has been exacerbated by the high fuel prices that have come our way over the past week or two.

It has also seen some investors look for stability in light of the tragic war in Europe, and the global tensions that has caused.

So how does this relate to Coles? Well, Coles is arguably one of the most inflation-proof shares out there. We all need food, drinks, and household essentials, which is Coles’ bread and butter (no pun intended).

Thus, it’s fairly safe to say that most consumers will reluctantly accept price increases for these products. Thus, Coles can effectively pass on any inflationary effects to its customers without fear of losing them. This also makes Coles a fairly ‘defensive’ company by conventional logic, which in turn gives it a reputation for stability.

Also, Coles happens to be a strong ASX dividend share, one that managed to increase its dividend over the difficult years of 2020 and 2021. It currently offers a dividend yield of 3.44%, which comes fully franked.

Thus, it’s possible it’s for these reasons Coles shares have enjoyed some buying pressure over the past month or so. We can’t say for sure. But Coles certainly has a lot of qualities that arguably make it an attractive option in a more uncertain world.

At the last Coles share price, this ASX 200 grocer has a market capitalisation of $23.65 billion.

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