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Coles and Woolworths shares hit record highs as Kaufland exits

Yesterday was a good one for Coles Group Ltd (ASX: COL) and Woolworths Ltd (ASX: WOW) shares.

The 2 ASX 50 stocks surged higher yesterday afternoon as German rival Kaufland announced it would be leaving our shores.

As both Aussie supermarket shares hit record highs, is there still potential for more growth in 2020?

What did Kaufland announce yesterday?

In a bizarre twist, Kaufland has pulled the plug on its Australian expansion at the last moment.

The German supermarket giant is owned by the 4th largest retailer in the world and looked set to seriously shake up the status quo.

Stores were supposed to open across Australia and the group had planned a $460 million distribution centre. 

That’s not the case anymore, with the German chain pulling out to focus on its European operations.

Coles and Woolworths shares surged higher yesterday afternoon as the Consumer Staples sector climbed 2.94% higher.

Should you buy Coles and Woolworths shares?

Kaufland’s exit reduces the likelihood of further price competition and lower sales, and clearly investors in the ASX supermarket chains were pleased with the news.

Coles and Woolworths shares both hit new record highs on Wednesday of $16.62 and $41.32, respectively.

While investors can be wary of buying shares at 52-week highs or record highs, this could be different – the goalposts have shifted and that requires a reevaluation of how much these ASX 50 shares are worth.

However, the offshore threat to their businesses isn’t totally eradicated. Aldi remains in the country and increased its market share to 11.4% in 2019, according to research from Roy Morgan.

There’s also still rumours that fellow German chain Lidl could make an appearance.

However, Kaufland is a big player on a global scale and their withdrawal is no doubt good for Coles and Woolworths shares.

For one, the Aussie groups won’t have to worry about the huge resources of Kaufland working against them. Secondly, Kaufland’s withdrawal could make other international chains think twice before entering the Aussie market.

I’d be watching this space as these 2 ASX supermarket stocks could really soar in 2020.

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Motley Fool contributor Kenneth Hall has no position in any of the 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 Scott Phillips.

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