Coles VS Woolworths share price: who’s leading the grocery wars?

We take a look at where analysts think the Coles and Woolworths share price could head next as Australia’s grocery wars heat up.

Who would have thought that the success of two multi-billion companies would hinge on some plastic trinkets?

Of course we are exaggerating here, but to understate the importance of the Coles ‘Little Shop’ promotion and the Woolworths ‘Lion King Ooshie’ promotion would be to do the subtle genius of both campaigns a disservice. Indeed, both have been drivers of top-line growth in recent times.

Speaking of the Group's slighlty weaker Q1 FY20 results, Coles noted that, 'cycling the 5.1% 1Q19 comparable sales growth from last year's highly successful Little Shop campaign would be a challenge given the competitor activity in the market.'

Humans, after all, love to collect things: be it watches, art, stamps or miniature versions of popular condiments and cereals.

Coles VS Woolworths shares: price action in focus

Marketing feats aside, the Coles and Woolworths share prices have mostly moved in-step this calendar year.

Coles (ASX: COL) has seen its share price rise 33% YTD, even as the Group's Q1 growth figures lag that of Woolworths.

Woolworths (ASX: WOW) matched Coles’s returns on a year-to-date basis, with its stock also rising 33% since January.

The Australian Financial Review recently ran an article titled ‘People always need to buy Food’ as a way of explaining Woolworths recent share price run up. A simplistic, though almost certainly correct explanation for why both Coles and Woolworths have seen their share prices hit all-time-highs in recent times.

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Same returns, different growth

Though recent share price gyrations and marketing tactics resemble one another, if the recent quarterly results revealed anything it was that both companies Supermarket operations are growing at relatively different rates.

As part of their Q1 FY20 results Woolworths (ASX: WOW) revealed that its total Supermarket sales had risen 7.8% to $10.7bn and its online sales had risen an even faster at 43.2%.

Woolworths attributed much of this growth momentum to its 'Lion King Ooshies and Woolworths Discovery Garden' campaigns.

By comparison, Coles (ASX: COL) reported significantly slower growth during Q1 FY20, noting that Supermarkets revenue only increased 1.6% to $7,705m. Coles also lags Woolworths in terms of online sales growth, growing this ever-important channel 23.5% during the quarter.

Coles VS Woolworths share price: the analyst take

For companies that have seen comparable share price performance on a year-to-date basis, it is interesting to see how analysts view the stocks differently.

Specifically, Coles (ASX: COL) currently has a hold consensus rating from analysts – with one buy recommendation, one overweight recommendation, seven hold recommendations, two underweight recommendations and four sell recommendations – according to the Wall Street Journal.

Woolworths (ASX: WOW) by comparison is less favourably viewed by brokers, currently commanding an underweight rating from analysts. Of this, only two analysts rate the stock a buy, with five analysts rating the stock a hold and six a sell, according to the Wall Street Journal


This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

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