Woolworths Stock Puts Australian Supermarket Shares Back On The Radar

Woolworths’ latest result, with net profit up A$175m to A$1.14b and a market value now above A$50b, has put supermarket stocks back in the spotlight as investors look again at everyday essentials as a potential anchor for portfolios. With Australian supermarket sales at A$53.85b and online channels growing, this article walks through three stocks exposed to this news and how the catalysts could matter for you.

The stocks covered below are just a starting sample, and the full screen surfaced 1 more company with an equally compelling supermarket or grocery narrative that is not detailed in this article. To go straight to the broader universe of supermarket and grocery retailers, analyze and identify your highest conviction ideas using the Defensive Consumer Staples – Supermarkets & Grocery Retailers screener.

Coles Group (ASX:COL)

Overview: Coles Group is one of Australia’s largest supermarket operators, running full service grocery stores, liquor outlets and digital platforms that focus on everyday essentials and convenience shopping. It also offers online delivery and click and collect services, loyalty rewards through flybuys, and add on services like insurance, credit cards and retail media that build on its core food retail footprint.

Market Cap: A$31.8b

Coles Group provides exposure to the defensive end of Australian retail, with most earnings tied to supermarket spending on food and household staples. Online ordering and click and collect are growing as customers shift more of their regular shop to digital channels. Recent results show modest profit growth compared with Woolworths. Coles is investing in automation, distribution centre upgrades and higher margin areas such as Coles Finest, Coles 360 media and a possible move into pet retail, all of which could influence future margins and cash generation. The catch is a relatively high P/E, meaningful debt and a dividend that leans heavily on earnings, so the room for error is limited if cost pressures or competition increase.

Coles Group’s push into automation, premium ranges and media looks like an earnings story investors are only partly pricing in. Get the full picture, including how its valuation and balance sheet stack up, in the 1 key reward and 2 important warning signs

Metcash (ASX:MTS)

Overview: Metcash is a wholesale and distribution company that supplies food, liquor and hardware products to independent supermarkets, convenience stores, bottle shops, hotels and hardware retailers across Australia. This gives investors indirect exposure to resilient grocery and convenience spending through the IGA, Foodland, Mitre 10, Total Tools and related banners.

Operations: Metcash generates A$9.2b of revenue from Food, A$5.4b from Liquor and A$2.8b from Hardware and Tools, with all A$17.4b of revenue sourced in Australia.

Market Cap: A$3.3b

Metcash provides a different way to gain exposure to defensive supermarket demand because it is the wholesale and logistics engine behind many local IGA and Foodland stores that compete with Woolworths and Coles. The business is diversified across food, liquor and hardware, with acquisitions such as Superior Foods and Total Tools adding new earnings streams and more ways to use its distribution network. Earnings and margins are tight and sensitive to volumes, rent and interest costs, and there are pressures in hardware and liquor that could affect returns. The stock trades at a discount to analysts’ cash flow estimates, which may appeal to investors seeking staples exposure with a value tilt rather than a pure supermarket operator.

Metcash’s wholesale engine and hardware add ons could mean the current pricing gap tells only half the story. Explore the valuation puzzle and volume risks in the DCF valuation analysis for Metcash

Woolworths Group (ASX:WOW)

Overview: Woolworths Group is a major supermarket and grocery retailer in Australia and New Zealand, running food stores and online platforms that focus on everyday staples and convenience shopping. It complements this with business to business food distribution and general merchandise under W Living, all supported by an omni channel model that links physical stores with e commerce and digital services.

Operations: Woolworths Group generates most of its A$72.3b in revenue from Australian Food at about A$52.4b, with further contributions from New Zealand Food at A$7.6b, Australian B2B at A$5.9b, W Living at A$5.7b and smaller amounts from Other and eliminations.

Market Cap: A$47.5b

Woolworths Group is a central stock for anyone using this defensive supermarkets screener because its supermarket and online food operations anchor a large, lower volatility staples exposure. Recent results show how that scale can translate into higher profit and market share when execution goes right. Net profit of A$1.14b, expanding margins and fast growing e commerce, including 15.9% online sales growth and stronger in store pickup, indicate that its omni channel investments are starting to pay off. At the same time, a very high P/E, earnings volatility from one off losses and reliance on external debt mean expectations are elevated and interest costs matter. Investors who want staples resilience with an omni channel component may find Woolworths Group worth a closer look.

Woolworths Group’s omni channel growth story, with A$72.3b in revenue and fast online sales, may not be fully reflected in today’s expectations. See how that momentum lines up with valuation and key risks in the analysis report for Woolworths Group

Seeking Alternatives Beyond Supermarkets?

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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