Wool­worths wins Christ­mas trad­ing bat­tle


Mor­gan Stan­ley an­a­lysts have de­clared Wool­worths the win­ner of the Christ­mas trad­ing pe­riod, out-trad­ing Coles for the third year in a row.

They es­ti­mated Wool­worths grew like-for-like sales 3 per cent while Coles’ like-for-like sales grew 2 per cent.

Mean­while, the in­vest­ment bank said that non-food re­tail­ers suf­fered a weak Christ­mas trad­ing pe­riod, with foot traf­fic down sig­nif­i­cantly last month.

“Fall­ing house prices, greater fo­cus on Black Fri­day driv­ing dis­count­ing and weaker eq­uity mar­kets all look to have held the Aus­tralian con­sumer back this Christ­mas,” the an­a­lysts said.

Mor­gan Stan­ley said that while lower foot traf­fic was partly due to con­sumers brows­ing on­line and then buy­ing in­store, the fig­ure was still soft.

The bank’s lat­est re­tail sec­tor com­ments come ahead of the re­lease of NAB’s De­cem­ber cash­less sales re­port, which is due to be re­leased later this month.

Novem­ber re­tail sales growth over­all lifted 0.4 per cent, slightly higher than con­sen­sus but was down on the pre­vi­ous pe­riod when growth was 1.2 per cent.

“This could sug­gest less pull for­ward of de­mand from Christ­mas sales this year, or that over­all sales growth over the last two months of the year was weaker,” the an­a­lysts said.

New ve­hi­cle sales in De­cem­ber also fell 14.9 per cent, the largest drop since the GFC.

Mean­while, su­per­mar­ket trade over­all im­proved in De­cem­ber com­pared with pre­vi­ous months, Mor­gan Stan­ley said, driven by food in­fla­tion and healthy in­stock po­si­tions.

“Food prices are ris­ing, which we think is partly driven by higher in­put costs linked with the drought, but also less su­per­mar­kets’ pro­mo­tional ac­tiv­ity,” the an­a­lysts said.

“Our chan­nel checks with sup­pli­ers in­di­cate that re­tail­ers lifted prices ra­tio­nally along­side sup­plier price in­creases and didn’t add ex­tra mar­gin as has been the case in the past.”

Mor­gan Stan­ley called cur­rent su­per­mar­ket trad­ing con­di­tions “be­nign”, say­ing that com­pe­ti­tion has pro­gres­sively re­duced over the past two years. That trend ap­peared to con­tinue in De­cem­ber, they said.

Still, Mor­gan Stan­ley said mar­gin out­look was likely to be con­strained by dig­i­tal in­vest­ments. “While like-for-like sales trends ap­pear ro­bust and broadly in line with cost in­fla­tion, we think the prospects for sig­nif­i­cant mar­gin ex­pan­sion are lim­ited given on­go­ing in­vest­ments, es­pe­cially in dig­i­tal ini­tia­tives,” they said.

They pre­dicted Coles would post a first-half earn­ings be­fore in­ter­est and tax food mar­gin of 4.02 per cent, down three ba­sis points year-on-year, while Wool­worths would book an earn­ings mar­gin of 4.74 per cent, up seven ba­sis points com­pared with last year.

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