Live markets, Thursday, June 10, 2021
Supermarket giant Woolworths has been a big figure in the news this week – for both good and bad reasons – but it was rival Coles at the center of a Credit Suisse report this morning.
Analysts Grant Saligari and Annabelle Diamond took a look at the promotion, e-commerce and store demographic comparisons for Coles and its top competitors ahead of Coles’ Investor Strategy Day on June 17.
“While we have reasonable visibility of sales revenue, we have more uncertainty about costs as companies enter more normal trading periods,” the company report said.
“The industry’s revenue growth has been below expectations since the start of the year, with low rates of net out-migration probably posing a downside risk for 2021 and 2022.”
Credit Suisse said there were also a number of indicators on special offers and multiple buyings that indicate increased price competition in the industry since April 2021.
Tactically, Coles continued to place more emphasis on the “low price every day”, while Woolworths placed more emphasis on weekly specials.
“While basket comparisons indicated negligible differences between Woolworths and Coles over the April to June period, there was considerable volatility week after week that appeared to be due to Woolworths’ promotional program,” the company said.
Retail sales of supermarkets saw a two-year cumulative growth of 8.5 percent in April.
Although there was an improvement in March, growth was still below Credit Suisse expectations.
“We believe that lower population growth rates (due to negligible net migration abroad) could be a problem for the sector until 2021 and 2022,” the company said.
Other observations included that Coles has a higher percentage of its stores in Melbourne than Woolworths or IGA and a lower percentage of stores in Sydney than Woolworths and Aldi.
Compared to Woolworths, Coles stores are located in locations that underindex in the 24-34 age group and overindex in the 34-44 age group.
Coles continues to track Woolworths in total website traffic, with traffic to Woolworths.com.au almost double that of traffic to shop.coles.com.au.
That said, Coles handled their website traffic better than Woolworths in April and May.
Credit Suisse has a 12-month target price of $ 18.19 on Coles and an outperformance rating on the company.
Coles lost 0.1% to $ 16.74 this afternoon, while Woolworths was up 0.8% to $ 42.97.