Coles beats Woolies

Coles claims to best Woolworths on everyday prices.

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

Wesfarmers (ASX: WES) the owner of Coles Supermarkets held its Strategy Briefing Day yesterday and it was a feast of information on all divisions of the company. Ian McLeod, the Managing Director of Coles, began his presentation by reminding investors of the poor state the Coles supermarket chain was in when Wesfarmers purchased it. Volume growth had flat lined at only 1%, profit margins were declining and stores had been underinvested in and were looking tired and old.

After this reminder of where the Coles brand had been, McLeod proceeded to highlight where Coles was headed. He explained that Coles has a reinvigorated business with team members who are customer focussed and customers who are increasingly loyal. Perhaps the most eye-catching slide in the presentation was that "Coles' everyday prices consistently cheaper than Woolworths on the same $100 basket since Down Down launched". The slide suggests that it has held this position since late 2010 and no doubt would be of concern to Woolworths (ASX: WOW) and their 'everyday value' claim.

The briefing also discussed Coles' expanding 'multi-channel' offering, which now includes home delivery and click & collect options for purchasing groceries. The competition between the supermarkets is certainly fierce as a resurgent Coles goes head-to-head with the dominant Woolworths. This competition is also evident in the broader stable of Wesfarmers-owned Bunnings, Kmart and Target stores which compete with the Woolies-owned Masters and Big W stores.

Meanwhile, the third largest supermarket group, Metcash (ASX: MTS), which is the wholesaler to and banner owner of IGA stores, has cleverly positioned itself in the convenience space. Metcash has also diversified in to hardware and auto parts supplies, most recently through the purchase of national car and truck parts business Australian Truck and Auto Parts Group.

Foolish takeaway

They say the only two things in life that are certain are death and taxes. Food could be a third, which makes a trip to your local supermarket pretty much a certainty as well. That doesn't mean investing in supermarkets at any price will be a profitable, however the entrenched position and defensive nature of their earnings and dividends does make them worthy long-term holdings if purchased at the right price.

The Australian Financial Review says "good quality Australian shares that have a long history of paying dividends are a real alternative to a term deposit." Get "3 Stocks for the Great Dividend Boom" in our special FREE report. Click here now to find out the names, stock symbols, and full research for our three favourite income ideas, all completely free!

More reading


Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.

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 »