Wesfarmers plays good cop, bad cop as brokers hunt for clues

The Coles chief executive, Ian McLeod, appeared to give his rivals at Woolworths a back-handed compliment in yesterday's results briefing, acknowledging that "big box" liquor stores were eating into the sales of smaller stores presumably including his Vintage Cellars and Liquorland operations.

The Coles chief executive, Ian McLeod, appeared to give his rivals at Woolworths a back-handed compliment in yesterday's results briefing, acknowledging that "big box" liquor stores were eating into the sales of smaller stores presumably including his Vintage Cellars and Liquorland operations.

Woolies does not report its results until March 1, but in its half-year sales figures the director of liquor operations, Steve Greentree, was laying claim to having improved market share in spite of "increased competitor activity" around Christmas coincidentally the month McLeod reckoned was his group's best in that category.

Greentree also said the bulk of the gains for Woolies were in the Dan Murphy's and BWS chains, where it has been opening stores apace. Coles's entry in that sector, First Choice, has also been active.

Neither retailer confesses its liquor figures separately from its food numbers. McLeod reckons Coles has experienced a contraction in both sales and profitability, and has detected signs of consumers cutting back on their spending in that area (Insider's vague knowledge of consumer economics was that we tend to drink more in recessions, rather than less, to get us through).

Bureau of Statistics figures for retail sales of liquor suggest the trend is generally higher in sales terms. The bureau does not measure profitability, but it all seems to suggest that Woolies is winning the battle for our livers.

A couple of other highlights that came out of the online analysts' briefing by Wesfarmers were the good cop (chief executive Richard Goyder), bad cops (McLeod of Coles, John Gillam of Bunnings and other divisional heads) routines in response to brokers' queries.

When the always-entertaining David Errington from Merrill asked where was the earnings bang from all the capital expenditure bucks laid out over recent years, Goyder said it was an important question.

He then went on to gently defend the group, saying with a lot of the money having gone into freehold property for future stores, it would be a while before the company started earning adequate returns but "we manage this very closely at a Wesfarmers board level".

Gillam was less diplomatic when JPMorgan's Shaun Cousins tried to turn the subject to Bunnings's fledgling "rival", Woolies' Masters stores.

"Perhaps it's timely to reflect on the fact that we are not going to give a running commentary [on competitors]," Gillam said as a warm-up.

He then moved on to point out that Australia's total home improvement market was $40 billion, of which Bunnings claims only 16 per cent, that its main competitors were the likes of Ikea, bathroom plumbers Reece and even garden shed makers Stratco, and "I struggle to make sense" of analysts who focus on quarterly rates of growth in sales rather than the bigger picture.

When Cousins went on to question performance at Coles, McLeod chimed in by observing that not many retailers were enjoying double-digit profit growth.

"So perhaps my disappointment is not as great as your own," McLeod said. To Cousins's credit, he pressed on, politely.

SO NEAR, YET ...

Ludowici investors now have a $10 a share offer for stock they could have bought for $3.50 barely three weeks ago - or do they?

Yesterday afternoon, FLSmidth & Co plonked down the Great Danish offer they had been negotiating with Brisbane's Ludowici since Wednesday, forcing a trading halt.

While the engineering group's Viking raid has the approval of Ludowici, the problem is there is no certainty it will be allowed to make the incremental bid.

That is because the rival suitor, Scotland's Weir Group, has complained to the Takeovers Panel that FLSmidth has already made public comments indicating its original $7.20 a share offer was a last and final one.

If the panel agrees, that leaves Weir in the box seat with its $7.92 a share offering. It will be interesting to see whether it tries to match the new bid, or waits until the panel adjudicating the case makes its decision.

Either way, FLSmidth has had to add a rider clause to its new offer, pointing out that if the panel's call goes the wrong way, it may not be able to give Ludowici shareholders $10 a share. A rejection would also possibly rule out the tax-effective sweetener Ludowici is contemplating - fully franked dividends of up to 80? a share, the face value of which would come off the $10.

Meanwhile, Commonwealth Bank offshoot Colonial has taken a bob each way on the outcome by selling almost half of its holding in Ludowici (most of it this week after Weir emerged) and reaping an average $7.75 a share.

GREAT TIMING

The US managed funds goliath Fidelity revealed yesterday it had tipped more than $250 million worth of Newcrest shares into the market since mid-December.

The start of it reducing its stake by 8.5 million shares seems to be an excellent piece of market timing for all investors, because even though it started at Newcrest's lowest price in about two years, the shares rose steadily throughout the exercise.

As a result, even though Fidelity started flogging the stock at less than $US31 a share ($A30.90), by the time its disposals crossed the 1 per cent mark on Valentine's Day (forcing public disclosure), they had clambered back to more than $US37.

Clearly Fidelity ought to lighten its holding more often. It is still left with 61.5 million shares in Newcrest, or a $2 billion stake - although that is small beer in Fidelity's universe of $US1.5 trillion of funds under management.

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