Woolworths Group Limited

ASX:WOW

Woolworths Group Limited

ASX:WOW
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$31.82 (-0.3%)
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#328
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Forum Topics WOW WOW Risks

Pinned straw:
shadow
Added 2 months ago

ABC Coverage on Woolworths and Coles - it's been great for shareholders, but the cat is now out of the bag.

Woolworths specific tactics:

  • Woolies sought to boost its profit margins by leveraging economy-wide inflation.
  • Woolies requested to share in any price increases granted to its suppliers.
  • Consumers ultimately paid more, suppliers did not receive the full price increase, but Woolworths increased its profit margins.


This negative press can't be good, cue public backlash...
Strawman
2 months ago

It seems money trumps morals, sadly @shadow

The ABC story couldn't have been great for Coles' & Woolies' brands. But at the same time, from a shareholder perspective, they have just highlighted how much pricing power they possess. And unless there's a credible risk we see some regulatory response, I dare say we all just shake our fists at them and keep shopping there. Such is their market omnipotence.

I do find it remarkable that Wollies trades at a PE of 25. Heck, they're at a PE of 20x FY26 forecast earnings! Not timid given analysts are forecasting 6-7% pa EPS growth in the coming years.

Still, the grossed up yield is ~4.3%, and the business is (as evidenced by the ABC story) somewhat inflation resistant with very reliable through-the-cycle earnings. So if you thought rates were coming down and wanted a good defensive allocation in your portfolio, you could do worse.

But I wouldn't expect to average more than an upper-single digit total return, at best, over the coming 5-10 years. There are worse fates than that of course, and for many that's likely a good enough value prop given the low risk nature of the business.

18
Hackofalltrades
2 months ago

It wouldn't surprise me if there is some regulatory response here.

In the meantime: https://www.youtube.com/watch?v=BdGv63C7OKk

4
Mujo
2 months ago

Doesn't seem to be a large increase in gross profit margin now or even expected by analysts?



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Cynic in me this is just politicians trying to shift blame - first the RBA Governor and now this.

No hint of cutting back on government spending and the NDIS which is out of control to help fix inflation.

5
RhinoInvestor
2 months ago

I don’t think WOW is the best investment (probably do just as well with fixed interest at the moment or some sort of inflation linked annuity) but IMHO, the government is trying to shift blame. I’d like to see Albo try and nationalise grocery stores … we fail to estimate the convenience of these large supermarkets:

  • Online shopping delivered to within a 1 hour accuracy for one included cost with < 1 day notice
  • Well stocked shelves (we aren’t like Albo’s soviet aspriations https://dustyoldthing.com/inside-soviet-grocery-store/
  • Good fresh selection (I was just in the US recently and the supermarkets were 85%+ high-fructose derived processed poison)


DISC: Not held IRL (but I still have some COL in the portfolio) or SM

6
topowl
2 months ago

100% the gov is trying to shift blame for inflation anywhere it can including Coles & WOW imo....just trying stop people talking about house prices which they'll do nothing about....

Obv the supermarket duopoly are not innocent of heavy handed tactics and price gouging....but you know...businesses are going to business....that's what they do....they're not alone.....

Honestly...I reckon it's just a glaring opportunity for Aldi to step up their game....expand their fresh fruit & veg offering and a few other things....and really start sinking their teeth into a bigger market share.



11
Mujo
2 months ago

Wage growth drives inflation, average pay tops $100k (afr.com)

Confidential Treasury analysis shows decade high wages growth that has pushed the average fulltime salary above $100,000 is now the biggest driver of consumer price inflation, undercutting claims widespread corporate profit gouging is to blame.

Pay rises overtook import prices and supply shocks to form the lion’s share of headline CPI in the June quarter last year, according to Treasury analysis obtained by The Australian Financial Review under freedom of information, a trend economists expect continued to the end of 2023 and into 2024.

The analysis undercuts claims from the Greens, unions and former ACCC chairman Allan Fels that widespread price gouging has been causing price rises. Those claims have sparked a wave of inquiries, including a Greens-led Senate probe into supermarket pricing, a year-long inquiry led by the ACCC, and a review of the voluntary grocery code by Craig Emerson.

The inflation analysis showed labour costs made up almost two-thirds of headline CPI in the year to June 30, 2023. The remainder was made up of import prices, global price shocks and other elements. When annual CPI peaked at 7.8 per cent in December 2022, wages made up about 30 per cent.

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