Forum Archive Index - March 2004

["Karyn W" <karyn_in_oz@hotmail.com>]

It is always interesting to compare a company with its industry competitors. 
  In NZ WHS had only one small competitor, which it fought with and won.  In 
Australia it has several huge competitors in Coles Myer and Woolworths (Big 
W), plus other smaller but still significant chains such as the $2 Shop, The 
Reject Shop, and a myriad of small local discount/bargain stores in every 
suburban shopping strip.

Coles Myer has had a major battle with its Kmart and Target brands, but they 
have been turned around very successfully over the last 2 years.  The same 
is now occurring with Myer Grace Bros.  Same amount of time, same turnaround 
strategy, but one company has been successful whereas the other not.

Supply chain automation - See Woolworths latest results for the success of 
their new supply chain project.  Coles is now embarking on a similar 
program.  How will WHS compete with CML's ability to leverage their 
supermarkets, Bi-Lo chain, Kmart, Target, OfficeWorks and Myers purchasing 
power?  Not to mention warehousing/transport/logistics etc.

Kmart's tag line is "Lowest Prices Guaranteed!" - find it cheaper somewhere 
else, they will better it.  This is difficult to counter with a "where 
everybody gets a bargain" - As a shopper you dont want a bargain, you want 
the lowest price!  Especially on garden gnomes :-)

Between Kmart and Target, there seems to be a constant 20% off sale on 
something all the time.  Margins are definately being squeezed, but sales 
and profits are up at both stores.  They can cut prices, and still make 
money.  WHS isnt making any money, so they cant afford to cut prices at all. 
  Hence the quadrupling of this years loss from last year.
For a real eye opener, compare Woolies Big W chain's latest Qtr stats  - 
sales up 8.5%, gross margins down from 30% to 29%, EBIT up 9.1%.  Plenty of 
room there for some serious discount wars!

I think there is a moral to this story - big fish in little pond = fish eats 
and gets fatter.  Little fish in big pond = fish gets eaten and dies.

Discl:  hold CML

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