I didn't suggest retaining market share 'at any cost', and conversely do not support a strategy of increasing margins 'at any cost' or irrespective of its impact on market share either.
Have you actually looked at the trend in the profit margin of woolies in the past few years?
It has been going up. Do you believe that the increases in profit margins of its groceries and liquor business is entirely a result of improved operational efficiency? Or is it just a price hike?
As I have stated in a previous post, I believe they have been increasing prices to offset the larger than expected losses in Masters, hoping that customers wouldn't notice.
Unfortunately surveys of customer perceptions about whether Coles or Woolies offer the best value suggest customers have caught on. The loss in market share further corroborates this.
Rather than taking responsibility and being up front with shareholders about the need to take their medicine by either reducing the dividend or issuing more notes (it would be cheap for Woolies in this environment of historically low interest rates), they've instead tried to hide the losses by jacking up prices in the hope that customers wouldn't notice.
Turns out they were wrong, customers noticed the increased margins (and probably the underinvestment in store upkeep, staffing, refurbishments), and decided to go elsewhere and Coles has been only too happy to take them.
How do you feel about the increasing profit margins at the expense of market share?
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