WOW - Woolworths Group

[So_Cynical]

There might be a segment of the market that wants no choice when shopping but they would be the minority.

Yet just look at the focus Woolies has on price, every commercial is price focused with a little freshness and quality thrown in, and choice is mostly an illusion, i worked for a packaging company a long time ago...we packed 4 different brands of sugar, all the same sugar just different packaging.

Aldi can only make things worst for Woolies and Coles, there is no scenario where Woolies and Coles do not give away market share to Aldi.

 

[McLovin]

Yet just look at the focus Woolies has on price, every commercial is price focused with a little freshness and quality thrown in, and choice is mostly an illusion, i worked for a packaging company a long time ago...we packed 4 different brands of sugar, all the same sugar just different packaging.

Aldi can only make things worst for Woolies and Coles, there is no scenario where Woolies and Coles do not give away market share to Aldi.

It might be an illusion but Aldi isn't going to get 20% of the market with a one size fits all approach: They've been in Germany for 50 years and only have ~8% of the market. Most consumers want choice. Wanting the best price doesn't necessarily mean someone wants a single product.

What about the scenario where Aldi eats IGA's lunch.

 

[TPI]

It might be an illusion but Aldi isn't going to get 20% of the market with a one size fits all approach: They've been in Germany for 50 years and only have ~8% of the market. Most consumers want choice. Wanting the best price doesn't necessarily mean someone wants a single product.

What about the scenario where Aldi eats IGA's lunch.

Yeah if IGA has 15-20% market share, per the Montgomery article, aren't they the first to be in the Aldi firing line, rather than WOW or WES?

And if one thinks that Aldi will have a material impact on Australian supermarkets is it time to sell or trim holdings of both WOW and WES?

 

[DeepState]

And if one thinks that Aldi will have a material impact on Australian supermarkets is it time to sell or trim holdings of both WOW and WES?

Consensus EPS three years out, FYI. Stock is not cheap on these metrics. It does not enjoy strong valuation support if your outlook is not in the vicinity of these figures. I'm not saying it's expensive. It's just not a screaming buy at these prices and for these expectations. Stock will likely move with changes in EPS expectations without materially over or under doing the proportionate movement.




Street sentiment is already bearish (balanced is bearish). EPS estimates have been trending down. Probably a lagging indicator though in terms of changes. Broker recommendations aren't exactly highly predictive though.




Also, to McLovin's earlier point, Safeway operating margin in the US where Aldi has been present and growing since 1979. Aldi has a nearly identical store count to Safeway now. ~ 1,300. Had been growing at 30-80 stores per annum since ground breaking. Margin compression happened in the US as well and it probably wasn't related to a sudden jump in competitiveness from Aldi.

 

[McLovin]

A couple of other points:

1. The UK is a much more fragmented market than Australia.

2. Aldi has about double the market share in Australia than it does in the UK. It hasn't really led to the demise of the profitability of the duopoly. The incumbents have responded by having cheap high quality home brands "Woolworths Select" etc. I'm not sure where the article gets 4% from but Roy Morgan puts Aldi's share at about 10%. Just ahead of IGA.

 

[The Falcon]

We are on the way to a 40m+ population, WOW is dominant, with the best sites, and best supply chain and many levers yet to pull. Discussion of its demise is premature...if it goes to sub 25 I will pin the ears back.

 

[So_Cynical]

We are on the way to a 40m+ population, WOW is dominant, with the best sites, and best supply chain and many levers yet to pull. Discussion of its demise is premature...if it goes to sub 25 I will pin the ears back.

No one is talking about demise, Coles and Woolies will always be dominant, the discussion is about market share and margins.

 

[luutzu]

I shopped at Aldi maybe 4 times since it opened 15 years ago?

The line (one or two max) are looonnnggg... I got to pay for bags; got to load it myself; got to return the trolley else lose $2. The food might be cheaper but I just don't "feel" it... it seems that it's cheaper because it's just cheap food somehow (and have tried its tuna/salmon canned food - they're quite terrible).

Mainly, I just don't see how not giving me shopping bag or bagging my own stuff saves me money. It could just go to them or we split it and I do all the work and they get half my work/savings... that and then I got to buy rubbish bags instead of using the shopping bags for the bins.

Anyway, that's my market research.

 

[TPI]

I shopped at Aldi maybe 4 times since it opened 15 years ago?

The line (one or two max) are looonnnggg... I got to pay for bags; got to load it myself; got to return the trolley else lose $2. The food might be cheaper but I just don't "feel" it... it seems that it's cheaper because it's just cheap food somehow (and have tried its tuna/salmon canned food - they're quite terrible).

Mainly, I just don't see how not giving me shopping bag or bagging my own stuff saves me money. It could just go to them or we split it and I do all the work and they get half my work/savings... that and then I got to buy rubbish bags instead of using the shopping bags for the bins.

Anyway, that's my market research.

I've got a Woolies nearby my house and a recently opened Aldi, but I am yet to visit the Aldi as the car park is too small and too hard for me to get a spot.

Anyone else visited their nearest Aldi recently care to share their experience?

 

[qldfrog]

My own feeling
I visit Aldi on a regulat basis (Carseldine North Brisbane as it is next to the bunnings there and convenient parking spacel
;
it is cheaper but not that great a shopping experience;
queues at checkout, not always pleasant cashier, extra for credit card payment.

but on the +
a DIFFERENT line which means european(german) products I can not find elsewhere and a break in the boring IGA/worworth/Coles choice.
Born and raised initially in Europe, the lack of real diversity in Australia shopping is one of my grief,
Understandable when produced here: small market, etc
less so when most of WOW offer is actually imported.

ALDI specials are amazing in value for money;
you get [you name it] on a week basis be it cycling gear, tools, lighting appliance etc and these are decent quality items imported in batch (probably worldwide) which are priced as per cheapest on the web, yet you can touch and check before buying;
even better they often mistarget and the cycling gear or tools in a shop used mostly by struggling retirees/families are then discounted the following weeks.Let's just say I do not believe this can be beaten;my win.
I doubt ALDI is a real thread to WOW
But just 2 days ago, I visited the Coles in Brookside and the shopping experience vs the WOW at the same location was day and night;
I had pleasure shopping there.
WOW is more a pain...no real price advantage or difference in lines I could see at Coles
just better aisles, presentation
That is a real worry for WOW
And worse, I have a costco membership;
Not that near from home but next to one IP I own, so I go there every second month;
This is a shopping experience and people buy big in the $300/400 trolley at least.Based from this floor experience, this is another nasty competitor for WOW, more than aldi which will be restricted to struggling people on a budget
So
Coles for cashed up/refined people, Costco for big families, aldi for (real) strugglers... and WOW for the rest....

 

[nulla nulla]

I suspect a lot of the participants in the discussion regarding Woolworths future are overlooking the fact that Woolworths and Coles are both growing their slices of the market. Coles is not growing at the expense of Woolworths and Woolworths are not growing at the expense of Coles. They are both taking market share from the other players.

Coles is growing at a faster percentage rate than Woolworths. This does not mean that Coles is actually lifting their monthly/quarterly/annual sales figures by a higher dollar value than Woolworths, it simply means that the amount by which Coles is lifting their sales figures is coming off a lower base than Woolworths.

For example: If Woolworths has a base of $150 million and gains 6%, Woolworths will have growth of $9 million; and
if Coles has a base of $100 million and has gains of 8%, Coles will have growth of $8 million. Bragging rights in the percentage of growth, are all media hype and do not reflect how well either company is doing.

Coles was a mess (and still is in respect of liquor sales) and had/has more scope for improvement than Woolworths. Woolworths has been well run for a long time and has got an amazing head start over Coles. You only have to look at their involvement in Hotels (poker machines), Bottle shops (Dan Murphys) and Grocerys and it is immediately obvious that Woolworths is the market leader. Coles has a long way to go playing catch up.

 

[Bill M]

I live on the Central Coast of NSW, I have been here 5 years. In that time 1 big stand alone Aldi has opened up and 3 more Aldi's have been approved for construction, that's in a 20 km radius. They are flat out building the stores.

I shop at Aldi and they are way cheaper than Coles or Woolworths and their product is good. Yesterday for example I bought truss tomatoes, nice and fresh for $3.99 a kilo. Coles and Woolies are usually $6 to $8. There is a big difference between Aldi and the other two price wise.

Where I think Aldi makes a big difference is where Coles and Woolies are in shopping malls and an ALdi opens up in that mall as well. They most definitely lose market share in that scenario. Aldi forces Coles and Woolies to drop their prices, no one would rather pay $8 a kilo for tomatoes at Wollies or Coles when you can get it at Aldi for $3.99.

My opinion is that overall, Aldi will only have little effect on the others profitability. As another poster wrote, the population is increasing everyday and there is plenty people to go around for all 3 big Supermarkets to do well.

If the WOW price goes down to the $28 - $29 zone then I might start thinking about buying it for my super fund to be held long term. At that price it will be almost a 5% fully franked dividend and I don't see that dividend being in danger, good luck.

 

[rimtas]

I live on the Central Coast of NSW, I have been here 5 years. In that time 1 big stand alone Aldi has opened up and 3 more Aldi's have been approved for construction, that's in a 20 km radius. They are flat out building the stores.

It does'n matter how many stores Aldi have opened in the last 5 years, because WOW started to slide only 7 months ago. Nobody even mentioned Aldi at the start of 2014, when WOW costed around ~40 bucks a share, during that time ALdi expanded it's network at the same pace as today, but optimistic investors in a rising trend have not considered this as a threat to WOW.

Only now, when downtrend is very close to it's bottom, everyone seems to have became an "experts" in forecasting how WOW gets slaughtered and their mind is generating a wild ideas about the reasoning for this.

The implications of this behaviour is a classic one-the majority of people will miss out the bottom because WOW at this point will not look atractive-share price is low, internet is full of "experts" bearish opinions, the threats from other stores on every corner an so on...

It is hard for them to imagine that WOW will hit the bottom in the early/mid of 2015 and the biggest rally in decade will be on it's way, which will carry prices to triple digits in the years to come.

 

[TheUnknown]

WOW what a disaster.............Aldi owning woolies, bunnings owning masters.

What could possibly go wrong?????

Chasing pathetic dividends...........for a share price that will be worth $20bucks soon.

 

[rimtas]

That's a good comment that captures an extreeme sentiment towards stock price and the company, notice the dates when they are made...

https://www.aussiestockforums.com/forums/showthread.php?t=3539&p=813996&viewfull=1#post813996

Trust me on this: Bunning's is a lumbering dinosaur, okay in its current undisturbed environment, and Woolworths + Lowes is the comet that will wipe it out.

Chasing pathetic dividends...........for a share price that will be worth $20bucks soon.

 

[TPI]

Speaking of dividends, in my view, historically WOW has been one of the best stocks on the ASX for its regular, reliable and predictable dividends and significant dividend growth over a long period of time, having increased dividends every year for at least the last 14 years, which includes the GFC. None of the other large cap stocks come even close to this for sheer consistency, so I don't think it's just like any other dividend stock. See the graph attached. I found this on www.sharedividends.com.au a couple of years ago and it inspired me to create my avatar with the blue columns in it . When people talk about how volatile and risky shares can be I like to point them to this. That being said, the past is not necessarily indicative of the future, so the discussion of the future prospects of WOW remains relevant now so I watch and read with interest the comments about this.

 

[luutzu]

Nothing wrong with a bit of competition - it keeps management sharp

Another way to look at competition is that instead of them destroying each other, they could just wink wink and divide the world into sections and niches? I mean, isn't that what all oligopolies do? They'll absolutely destroy the little guys, but the big guys they'll just come to certain agreements with through winks, nudges and signals.

Why fight when you can make money?

 

[pinkboy]

Nothing wrong with a bit of competition - it keeps management sharp

Another way to look at competition is that instead of them destroying each other, they could just wink wink and divide the world into sections and niches? I mean, isn't that what all oligopolies do? They'll absolutely destroy the little guys, but the big guys they'll just come to certain agreements with through winks, nudges and signals.

Why fight when you can make money?

Because that sounds like collusion.......

pinkboy

 

[luutzu]

Because that sounds like collusion.......

pinkboy

You, me, the ACCC say collusion; they say "can you prove it?"

If we say "yea"; they say "Oh OK. That one bad executive doing the unconscionable is now terminated. Here's the wrist to slap and we promise to keep management in line with our own high ethical standards of serving the Australian public with blah blah".

Anyway, was just having fun with predicting the future and management actions.

 

[Wysiwyg]

But just 2 days ago, I visited the Coles in Brookside and the shopping experience vs the WOW at the same location was day and night;
I had pleasure shopping there.
WOW is more a pain...no real price advantage or difference in lines I could see at Coles
just better aisles, presentation
That is a real worry for WOW

Lighting, sound, colour and space make the sensory experience all that more enjoyable and could be worth extra feel good purchases as well as return business.