Wesfarmers

Deflation isn’t just affecting Woolworths, which reported weak sales growth in the first half of 2012 (see 1 Feb 12 (Long Term Buy – $24.92)). It’s also hitting the Wesfarmers-owned Coles, which yesterday reported a 14% lift in first half profit, lower than market expectations. But it was still an impressive result—particularly as the liquor operation is underperforming—and it highlights that Coles under Ian McLeod is becoming a bigger threat to Woolworths. Almost all of Wesfarmers’ other retail businesses, including stalwart Bunnings, performed well. Target was the fly in the ointment, but margins have looked too-good-to-be-true for some time....

Deflation isn’t just affecting Woolworths, which reported weak sales growth in the first half of 2012 (see 1 Feb 12 (Long Term Buy – $24.92)). It’s also hitting the Wesfarmers-owned Coles, which yesterday reported a 14% lift in first half profit, lower than market expectations. But it was still an impressive result—particularly as the liquor operation is underperforming—and it highlights that Coles under Ian McLeod is becoming a bigger threat to Woolworths.

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