Morning Report Friday 12 June 2015
Yesterday was very interesting for the Supermarket sector. The Australian ran an article focused on the German powerhouse, Lidl about to enter the Australian grocery battle.This increased competition is clearly going to pressure the margins/profitability of both Woolworths (WOW) and Coles (Wesfarmers - WES). Lidl has a similar business model to Aldi, with predictions now being made that these aggressive discounters will get ~20% of the Australian grocery market. However what I found interesting was on the same day, the AFR on-line led with a piece by a prominent Value Asset Manager that Woolworths was in its favourite 5 stocks to accumulate at current levels ~$27. However, on the same day, another prominent value investor, Roger Montgomery posted a blog basically saying that ”looking long term, the fundamental case against Woolworths, Coles and IGA continues to strengthen”. Hence, what do we think at Market Matters?
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