What's behind the retail results?

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**Carrington Clarke** (0:38)
Australia's grocery wars have a scoreboard and the latest retail numbers are in and they're telling. Woolworths and Coles continue to be the duopoly that dominates the market. But the way that they operate is shifting. Online sales are surging and smaller competitors are increasingly fighting over a pretty narrow slice of the pie. Welcome to ABC Business Daily.
Now here at ABC Business Daily we look at company results all the time, but Woolworths and Coles are such a big part of the Australian retail landscape that we wanted to spend a little bit of extra time on those numbers and to see what they're really telling us. So to help us unpack the results and the bigger trends underneath them, I'm joined by consumer analyst at Barrenjoey, Tom Kierath.
Tom spends a lot of his time looking at Australia's biggest supermarkets and also our retailers. He looks at how they're growing, what consumers are spending their money on and who's gaining ground. So thank you so much for joining us on ABC Business Daily. Tom Kierath.

**Tom Kierath** (1:41)
Thanks, Carrington. Yeah, good to be here.

**Carrington Clarke** (1:43)
All right, so let's start with the big two. On the surface, they've had a pretty good year. Sales are up, profits are up, online is growing strongly. But when you put all those numbers together, what is it actually telling us about the grocery market? There's obviously been a huge concern about what higher interest rates were going to mean, what the war in the Middle East would mean, pushing up oil prices leading through to higher inflation. But are consumers still spending and are Coles and Woolworths still getting the biggest part of that consumption pie?

**Tom Kierath** (2:10)
Yeah, they are.
There's a few we would call tailwinds for the supermarkets at the moment. One is, as you mentioned, the cost of living crisis. People are spending a little bit less outside the home and more at supermarkets, which is helping them. Second, there's a bit of inflation coming through, which naturally helps their sales growth. I think the third one is, for the first time in a long time, and I can remember both Coles and Woolworths are winning market share.
The independents are seeding a bit of share, Aldi's actually seeded a bit of share. So from our perspective, they're actually pretty well placed at the moment. Who knows how long that lasts for, but I think both the businesses struggled. Maybe the last two or three years, there's a bunch of public perception, a bunch of government inquiries that really affected their brand and the trust with the consumers, but they've worked pretty hard to rebuild that. I think we're seeing that now in the profit and the sales updates that they've provided in the last couple of weeks.

**Carrington Clarke** (3:12)
Let's break down what those most recent numbers told us about not only how they're doing combined, but is Woolworths starting to pull away from Coles or what's going on there?

**Tom Kierath** (3:24)
Yeah, it depends on how you measure it. So if you look at the most recent trading update for July and August, Woolworths is in the sevens and Coles is in the three. So, and obviously Woolworths was helped by the Ushies campaign that certainly my household was pretty popular and a lot of people jumped on that.
But Woolworths a year ago was really struggling. They did just over 1% growth. So one of the ways we like to analyze it is to add the two years together.
And when you do that, there's actually, there's not much difference in the overall sales performance. So the kind of acid tests as it were for us will be the Christmas quarter, Woolworths, they've got a kind of clean base. Remember, two years ago, they had the supply chain challenges, which meant that for the last two months, they've been growing pretty strongly. But there's kind of, I guess there's no excuses for them now in the Christmas quarter. And that will give us, I guess, a true indication of which retailer or which supermarkets kind of leading the supermarket race at the moment.