"WOW was already in the top position with the business in pretty good shape, now all they're doing is giving up margin."
I would have to strongly disagree with this statement. No evidence at all that WOW is giving up margin. In fact quite the opposite, they are protecting and expanding EBIT margin and forgoing growth share to Coles in the process.
Luscombe's reaction to Coles reinvigoration has been to place margin expansion ahead of new market share growth.
Lets not forget that Coles are also expanding margins albiet from a lower base. IMO a lot of the recent "Down Down" strategy on Coles behalf is pure PR spin. They target key commodity lines to lead the campaign and expand margin on more discretionary goods. The net result? Overall margin expansion across their Food and Liquor business.
I would place both WES and WOW as winners in the current retail war. WOW already leads the world in terms of margins for a supermarket retailer, and I am quite sure Coles long term game is strategies to improve margins. Margin expansion will deliver earnings growth a magnitude faster than market share growth, that is fickle and reversible by its very nature.
The losers will be the small independent retailers (haven't they already been losing for the last 20-30 years?) and the general consumer who thinks they are so much better off now WOW and Coles are engaging in a price war.
WOW Price at posting:
$26.92 Sentiment: LT Buy Disclosure: Held
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