Paul Rickard provides regular updates of the Woolworths versus Coles (Wesfarmers) supermarket battles for Switzer Super Report readers but the very low prices of the last few weeks and months have many wondering whether or not to pick up either, or both, of these behemoths.
Last night, Peter interviewed Melbourne-based retail consultant Tristan Kitchener on his show on the Sky News Business channel about our supermarket wars. Kitchener says that Woolworths – with a higher margin of 7.9%, compared to Coles 4.5% – has a bigger focus on the shareholder. Woolworths also really took its eye off Coles as they started its transition and are also now competing with an Aldi that has picked up the pace.
But Woolworths will come back.
Woolworths
Source: Yahoo!7 Finance, 1 October 2015
“They’re a bigger business. They’ve got some scale advantages and their cost of doing business is probably 1% to 1.5% lower than Coles as well,” Kitchener said.
The challenge will be in how Coles will react and whether it can compete on factors other than price, such as customer experience. Of course, there is Aldi and potentially other global businesses to compete with as well.
Charlie Aitken hasn’t bought in yet but says: “I’m watching Woolworths closely and waiting to see who the new CEO is.”
I’d be waiting for that new appointment too before I bought in and Peter and Paul are still in hold mode. Perhaps one of the key differences between the two companies, as Paul has said before, is that Wesfarmers is so much more than just a supermarket. Bunnings, Officeworks, Kmart and Target contribute just half of all of Wesfarmers earnings.
And what about BHP after the Glencore fiasco earlier this week? I asked Peter yesterday if he was looking at buying BHP at these prices. This is what he said.
“If I didn’t have enough of it already, I certainly would be!”
BHP
Source: Yahoo!7 Finance, 1 October 2015
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