WOW 2.09% $36.54 woolworths group limited

smaller retailers lose mkt share

  1. DSD
    15,757 Posts.
    On another woolies thread i commented (about 6 weeks ago) that 'MTS may not be around in 5-6 years time'. I was not being entirely flippant as it's self-evident that WOW and WES continue to increase their market dominance. Today's article (from The Oz) shows how these 2 giants are growing sales faster than their competitors.

    'Coles-Woolworths battle putting the squeeze on smaller rivals'.
    Blair Speedy From: The Australian February 02, 2011 12:00AM.

    'THE battle between supermarket giants Coles and Woolworths is cementing the two chains' dominance of the retail sector at the expense of smaller operators, according to analysts. Wesfarmers-owned Coles this week reported food and liquor sales of $7.04 billion for the December quarter, a 6.6 per cent increase excluding the impact of new store openings.

    Woolworths reported food and liquor sales of $9.5bn for the same period, but its growth was slower at 2.5 per cent, excluding new store openings.

    Macquarie Equities analyst Greg Dring said Coles's sales growth for the quarter was ahead not only of Woolies, but of the whole food sector, suggesting it was gaining market share at the expense of others.

    Historically the Coles and Woolworths food and liquor businesses would have accounted for about 80 per cent of food sales growth, despite having combined market share of about 48 per cent, Mr Dring said.

    "However, since the second quarter of 2009-10, Coles and Woolworths' share of market growth has ranged between 80 per cent and 120 per cent . . . the implications for competitors" including independents supplied by Metcash and food speciality retailers "are obvious".

    Credit Suisse analyst Grant Saligari said Coles was still at a relatively early stage of the turnaround that began with its 2007 acquisition by Wesfarmers, and was expected to keep growing sales and profitability.

    Encouragingly, the fact that both chains reported continued price deflation -- 0.2 per cent for Coles and 3.8 per cent for Woolies during the quarter, excluding tobacco -- was consistent with a shift in product mix to higher-value categories, such as health and beauty, Mr Saligari said.

    UBS analyst Ben Gilbert said Woolworths' sales per square metre of floor space were still about 15 per cent ahead of Coles, but Coles had reduced the premium below 30 per cent since the Wesfarmers acquisition.

    However, Mr Gilbert warned that the price deflation that led both Kmart and Target to report 0.6 per cent and 4.2 per cent falls in same-store sales respectively for the December quarter was likely to weigh on sales growth in the second half of the financial year.

    That was a result of Wesfarmers' foreign exchange hedging policy.



 
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