"A government department finds wow one of the most profitable...

"A government department finds wow one of the most profitable supermarkets in the world...share price responds accordingly."

According to that government-commissioned report, while WOW might have one of the highest EBIT margins, that's only one component a measure of profitability; the other is capital intensity (i.e., how much capital needs to be invested to generate a given unit of Sales).

Together, the product of EBIT Margin and Asset Turn result in Return on Capital (ROC), which is the real measure of a degree of profitability.

And while WOW (along with the other supermarket operators in Australia) generate at above-average margins compared to global peers, the Australian supermarket sectors is more capital intensive than global counterparts (due to Australia having a low population density, meaning the ability to amortise FMCG infrastructure such as DCs and logistics assets is limited).

So where Australian supermarkets win on Margin, they give back on Asset Turn, resulting in ROC for Australian supermarkets being pretty much close to the global average. Which is why the ACCC found no smoking gun.

From the ACCC's final report:




Ergo: share price rallying around.

.