Woolworths Limited and Wesfarmers Ltd shares could keep falling on Aldi's rise

Woolworths Limited (ASX:WOW) and Wesfarmers Ltd (ASX:WES) shares followed the S&P/ASX 200 lower on Tuesday.

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The latest retail turnover data from the Australian Bureau of Statistics (ABS) was released on Tuesday which showed a 0.2% seasonally adjusted rise in May. That's certainly a lacklustre growth rate, however, some industries of course fared better than others.

For shareholders of both Woolworths Limited (ASX: WOW) and Wesfarmers Ltd (ASX: WES) the ABS data was better, with the food retailing industry putting in one of the strongest performances across the sector, recording a seasonally adjusted rise of 0.7%.

That news wasn't good enough to excite investors however, with Woolworths and Wesfarmers sliding 1% and 1.3% respectively. This was broadly in line with the 1% drop in the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO).

One explanation for the lacklustre response from investors towards these two supermarket giants is the likely assumption that competitor Aldi will have captured a significant share of food retailing growth.

It certainly wouldn't be surprising if that was the case given the growing understanding amongst investors of the effect Aldi's entry is having on the Australian supermarket industry. This means the world-leading margins of Woolworths might be a thing of the past.

It's because of this competitive squeeze on Woolworths' profits that the Woolworths share price may still not be cheap.

In contrast, Wesfarmers shares could arguably offer value today despite not having endured the share price falls experienced by its peer thanks to its conglomerate structure and the significant growth potential of its Bunnings business.

Motley Fool contributor Tim McArthur has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »