Chemist Warehouse has sustained double-digit comparable sales growth for three consecutive years. The retailer has won market share from other pharmacies and Coles and Woolworths. Chemist Warehouse advantages are its pricing tactics and breadth of range. While Coles and Woolworths are unlikely to fix their ranging issue, they may adjust pricing tactics. Chemist Warehouse is cheaper than the supermarkets when comparing shelf prices to Chemist Warehouse’ standard price, but much less so when comparing promotional prices. The risk to Chemist Warehouse is that Coles and Woolworths use everyday low pricing tactics to improve their relative pricing to Chemist Warehouse. They have begun lowering prices on high profile products and more will come over the next 12 months. We may see a slowdown in Chemist Warehouse sales growth towards single digits over the next year.

The link provides a presentation associated with a webinar we held. The recording is embedded in the presentation and details our revised forecasts for retail in the year head. Woolworths is undertaking a program called Customer Offer Reset (COR), which will reduce its branded range and shift more products to an every day low pricing (EDLP) proposition called Lower Shelf Price (LSP). The program will show up on shelf shortly and impact the next two years. COR and LSP should be positive for sales and earnings, but it does depend on the competitor response.

Woolworths is undertaking a program called Customer Offer Reset (COR), which will reduce its branded range and shift more products to an every day low pricing (EDLP) proposition called Lower Shelf Price (LSP). The program will show up on shelf shortly and impact the next two years. COR and LSP should be positive for sales and earnings, but it does depend on the competitor response. These programs demonstrate a sharper focus by Woolworths on execution and price trust. While not solely related to COR and LSP, we expect Woolworths to sustain above market (and Coles) growth over the next year and EBIT margin expansion.

Endeavour Group reported FY24 EBIT up 1.8% on a 52-week basis and EPS dropped 4.3% given higher finance costs. We expect a flat EPS of 28.6 cents for FY25e with subdued 1H25e sales growth and higher finance costs largely offsetting better gross margins and cost savings.  Endeavour’s underlying sales momentum shows market share gains and cost savings are likely to continue to build in FY26e.

Consumers love a bargain and retailers usually like giving them one. In Issue 5 of Price Watch, we profile the pricing tactics used by major Australian retailers, the legal boundaries for price tactics and where retailers can trip themselves up. There is a lot of wasted promotional money in retail and there is earnings upside in the order of 3% to 5% by taking an analytical approach to promotions. Super Retail Group and Woolworths have introduced new systems to manage promotions, improving the efficiency of promotional spend and lifting gross margins.