Woolworths (ASX: WOW) has once again made headlines, raising eyebrows of investors and analysts alike after claiming to politicians and industry regulators that it had not increased its market share of 28% in the food and grocery market since 2007.
On the contrary, in its full year report, which was released to the public in August, chief executive Grant O’Brien boasted that it had, in fact, increased market share, which was a “very strong signal” of the successes of the company.
According to The Australian Financial Review, Woolworths utilised data from the Australian Bureau of Statistics and Nielsen’s Home Scan to prove its claim of no growth. Data from the latter however, does not take into account fresh food products, which Woolworths has been much more dominant in than competitors such as IGA or Coles, which are owned by Metcash (ASX: MTS) and Wesfarmers (ASX: WES).
With the company’s shares jumping to record highs in what is being deemed the “Blue Chip Bubble”, it would be very reasonable for investors to expect an increase in Woolworth’s market share. Analyst David Thomas expects its share would be somewhere between 35-39%.
Since 2007, Woolworths has opened 121 new supermarket stores across Australia. It has also invested in customer loyalty offers and heavily discounted prices – a move that suppliers such as Coca-Cola Amatil (ASX: CCL) believe to be anti-competitive behavior, as it puts immense pricing pressures on smaller grocers such as Aldi or Costco around the country.
It is being speculated that it has made such claims to the government and regulators in an attempt to ward off new laws that would likely restrict its growth.
It is clear that Wesfarmers and Woolworths possess the greatest market share in the food and grocery industry within Australia. Should the government and regulators discard Woolworth’s claims and introduce new restrictions to market share gains, Woolworth’s share price could begin to fall from the throne in which it currently sits.
Thrown off by Woolworths’ ‘no growth’ claim? If you’re looking for other great investment ideas, click here now to get The Motley Fool’s special FREE report, “3 Stocks For the Great Dividend Boom”. The report lists the names, stock symbols, and full research for our three favourite income ideas, all completely free!
The Motley Fool’s purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned in this article.
Where to invest $1,000 right now
When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*
Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.
*Returns as of June 30th
- Coronavirus (COVID-19): 6 charts every Australian needs to see – April 6, 2020 1:46pm
- Innovation through crisis – April 2, 2020 11:48am
- Coronavirus (Covid-19): Why Is Italy’s Fatality Rate So Bad? – March 26, 2020 3:39pm