Is the Woolworths Group Ltd (ASX: WOW) share price a buy after all of the coronavirus panic buying?
Woolworths is the biggest supermarket business in Australia, so it was probably the biggest beneficiary of people deciding to buy so many goods.
How much was revenue boosted during the period? Woolworths hasn't released its trading update yet for the March 2020 quarter, but Coles has. I think we can get a good reading of the sector from one of the other main players.
Coles reported that for the 12 weeks from 6 January 2020 to 29 March 2020, supermarket revenue increased by 13.8% with comparable sales growth of 13.1%. Coles Online sales still grew by 14% during the quarter despite the temporary suspension of online orders for most customers on 18 March 2020.
However, just because sales grew by over 13% doesn't mean you should expect 13% profit growth. Coles said there were additional costs like pop-up distribution centres, hiring more staff, more cleaning and more security. There would also have been more logistics costs to get the in-demand products where they needed to be.
One other noteworthy thing was that there was 2.6% price inflation of items. It was 1.8% growth excluding tobacco and 'fresh'.
What does this mean for the Woolworths share price?
It's obvious that Woolworths is also going to report a large increase in revenue. But it may also acknowledge that there were higher costs in delivering the growth.
The panic buying seems to be levelling off with Coles saying in the first four weeks in the fourth quarter growth has trended back towards pre-COVID-19 levels. Coles also said it's going to have to absorb cost price pressures as a result of the drought and bushfire effects.
Woolworths is a defensive business that was well suited to perform well during this period. But I think the volume of extra buying activity is over. The Woolworths share price isn't attractive to me at this price with sales growth slowing in the sector.
Interest rates are really low, but I'm looking for long-term growth. Woolworths is already a very large business, I'd rather go for smaller shares with better growth potential.
