Australian supermarket giants Coles and Woolworths have experienced diverging fortunes, sparking debate among fund managers and analysts regarding their respective investment potential. Coles, a major supermarket chain, focuses on providing everyday Australians with quality food, groceries, and household goods. Woolworths, another leading retailer, operates supermarkets and other retail businesses, offering a wide range of products and services to consumers.
Coles’ shares jumped 8.5 per cent after unveiling strong sales figures and announcing price reductions on over 240 products. In contrast, Woolworths’ share price plunged 15 per cent following reports of declining earnings in its core Australian supermarkets business and losses at Big W. Over the past year, Coles shares have risen by 25 per cent, while Woolworths shares have fallen by nearly 20 per cent.
Analysts are divided on which stock is a better buy. Morgan Stanley prefers Coles, citing supply chain efficiencies, sales momentum, and maturing investments. UBS also has a ‘buy’ rating on Coles. Wilson Asset Management has increased its position in Coles and reduced its stake in Woolworths. Vertium Asset Management noted Woolworths’ turnaround plans were ‘too slow’ and its supermarket sales are falling behind Coles.
Morningstar and Schroders suggest Woolworths’ recent share price plunge was excessive, arguing that Woolworths has greater long-term growth potential and can cut prices to regain market share. Atlas Funds Management is also considering Woolworths, citing its lower price-to-earnings ratio compared to Coles, anticipating that eventually their performance will revert to the mean.
