Shares in Woolworths Group Ltd (ASX: WOW) and Coles Group Ltd (ASX: COL) are both trading near their 12-month highs, but one is a clear standout for shareholder return performance over the past year.
Woolworths shares are up 55.8% on a 12-month basis, while Coles shares have risen just 4.5%.
So, is Coles poised to catch up over the next 12 months?
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Broker has run the numbers on the ASX retailers
The Jarden analyst team examined the retailers and came to a conclusion as to which one of the major supermarket operators represents the best value from a shareholder perspective.
The broker has just finalised its 15th fast-moving consumer goods survey, which points to 2% sector growth over the next six months, with Woolworths tipped to be the top performer again.
Jarden said themes over the past 12 months have remained consistent, with suppliers ceding terms to retailers, and shoppers increasingly seeking out promotions.
The broker said:
The results support stronger margins for COL and WOW, which could suggest some upside to FY27/28 forecasts for 10 basis points of expansion. We leave forecasts unchanged, with the view that WOW's investment in below the line, momentum from Ooshies and customer offer reset opportunity leave it well placed to maintain momentum. Overall we believe retailers are extracting better terms and looking to put this into price. The question is whether this will flow through into margins? We would argue consensus assumes WOW can maintain stronger top-line, with neither COL or WOW banking margin.
Woolworths Chief Executive Officer Amanda Barwell said recently while announcing the company's full year results that they had had a "pleasing" start to the year supported by the strong performance of the Disney Ooshies collectibles program.
She added:
Customers are expected to remain value-focused in the year ahead and we are committed to limiting the impact of rising costs through low and dependable prices. Wage growth is also expected to remain elevated by historical standards reflecting the current year's annual wage increase of 4.75% in Australia and progressive changes to pay for our 18 and 19-year-old retail team members. These cost pressures challenge us to be even more efficient, leveraging technology to be more productive in order to reinvest back into the business for our customers.
Woolworths edges out its rival
Jarden has an overweight rating on Woolworths shares. Its price target is $42, which sits slightly above the current price of $41.74.
It has a neutral rating Coles shares. Its price target is $22.80, which sits below the current share price of $24.22.
Among other retailers, Jarden has overweight ratings on Wesfarmers Ltd (ASX: WES) and Metcash Ltd (ASX: MTS), and a buy rating on Sigma Healthcare Ltd (ASX: SIG).
