SPCE Stock – Markets Live, Thursday 10 June, 2021
Supermarket giant Woolworths has been a prominent figure in the news this week – for both good and bad reasons – but it is rival Coles at the centre of a report from Credit Suisse this morning.
Analysts Grant Saligari and Annabelle Diamond have poured over the promotional, e-commerce and store demographic comparisons for Coles and its major competitors ahead of Coles’ investor strategy day on June 17.
“Whilst we have reasonable visibility of sales revenue, we have more uncertainty with respect to costs as companies enter more normal periods of trading,” the firm’s report reads.
“Industry revenue growth has been below expectations year to date, with low rates of net overseas migration likely to be a downside risk for 2021 and 2022.”
Credit Suisse said there were also a number of indicators on specials and multi-buys that point to increased price competition in the sector since April 2021.
Tactically, Coles continued to place more emphasis on ‘Every Day Low price’, while Woolworths placed more emphasis on weekly specials.
“Whilst basket comparisons indicated negligible differences between Woolworths and Coles over the period April to June, there was considerable week on week volatility which appeared to be driven by Woolworths’ promotional program,” the firm said.
Retail sales for supermarkets had a two-year cumulative growth of 8.5 per cent in the month of April.
Whilst there was an improvement in March, growth was still below Credit Suisse expectations.
“We believe that lower rates of population growth (due to negligible net overseas migration) could be an issue for the sector through 2021 and 2022,” the firm 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.
Relative to Woolworths, Coles’ stores are in locations that under-index in the 24-to-34-year-old age group and over-index in the 34-44-year-old age group.
Coles continues to trail Woolworths in total website traffic, with traffic to woolworths.com.au almost double that of traffic to shop.coles.com.au.
That said, Coles held its website traffic better than Woolworths through April and May.
Credit Suisse has a 12-month target price of $18.19 on Coles and an outperform rating on the company.
Coles was down 0.1 per cent at $16.74 this afternoon, while Woolworthswas up 0.8 per cent to $42.97.