Woolworths Group Ltd (ASX: WOW) shares are having a strong finish to the week.
In afternoon trade, the supermarket giant's shares are up 6% to $29.80.
Why are Woolworths shares charging higher?
Investors have been scrambling to buy Woolworths and Coles Group Ltd (ASX: COL) shares today after the Australian Competition and Consumer Commission (ACCC) released its final report for its supermarkets inquiry.
According to the release, the competition regulator has made 20 recommendations after "finding that ALDI, Coles and Woolworths are some of the most profitable supermarket businesses among global peers and their average product margins have increased over the past five financial years."
However, as you might have guessed from the way that Woolworths shares are racing higher today, the recommendations are not overly punitive.
In addition, any slim chance that the big two supermarkets could be broken up appears to have been ruled out with today's report.
Commenting on the inquiry, the ACCC's Deputy Chair, Mick Keogh, said:
Based on this extensive analysis we have recommended a range of measures to improve conditions for competition in the sector and deliver better outcomes for consumers and suppliers. There is no 'silver bullet' that will address all the issues we have identified in the supermarket sector, but we are confident that our recommendations will make a difference for consumers, will equip suppliers to make more informed business and investment decisions while bearing a more appropriate level of risk, and will boost competition in the sector.
What are the recommendations?
Among the recommendations being made are ALDI, Coles and Woolworths being required to publish their prices on their websites, provide greater transparency regarding pricing, promotions and loyalty programs, and highlight where 'shrinkflation' is happening.
It is also "recommending that all levels of government simplify and harmonise planning and zoning requirements to make it easier to establish new [competing] supermarkets."
Woolworths responds
Woolworths has responded to the news, noting that it has already taken action on many of the recommendations.
Commenting on the report, Woolworths Group CEO, Amanda Bardwell, said:
We have worked constructively with the ACCC to help it understand our business, the sectors in which we operate, our suppliers and supply chains, and the considerable competition we face. We play an important role in the lives of millions of Australians, more than 200,000 team members, and our suppliers. We have taken steps to improve the experiences customers and suppliers have with us, and continue to listen carefully to all of them.
However, Bardwell believes that the supermarket space is competitive. She said:
Our experience, in store and online, is that the Australian grocery sector is very competitive. Our customers have greater choice than ever before and are cross-shopping between different retailers more often. If we don't get it right for our customers, they shop elsewhere.
We welcome recommendations that improve transparency for customers where they don't have unintended consequences or increase costs. […] Having fully cooperated with this Inquiry, we will review the report and its recommendations to identify any insights to make us a better business for our customers, suppliers and communities in which we operate.
