Financial Analysis on Coles Myer & Woolworths

According to Pettinger(2004) The Company extends its pillar of service not only by aiding clients in making decision to shop in stores, but also making it easy for them to drop by the stores and shop. There are two potential competitors existing in the market .There is Woolworths which has an 8% stake of the vast Australian market share and uses its subsidiaries such as Home Hardware and Timer, Thrifty Link, and Masters Home Improvement. There is also Metcash which has a 7.3% market share and uses its two subsidiaries: True Value Hardware and MITRE 10. Bunnings is currently the market leader in Australia (see Appendix figure1.1).Australia’s largest and most profitable home improvement retailer with (9,012,000) customers who shop at Bunnings over period of four week July 2014. This numbers was up in July 2012/13 which was 8,435,000. Bunnings potential competitors are Mitre 10 (1,789,000) and Masters (1,217,000).

This is no surprise due to the major expansion that CC took on in 2001. Lastly, the long term debt to capitalization ratio slowly decreases which is just showing how CC is not being risky with their capital through debt.

Because Woolworths and Coles generally have homogenous products, they rely on a heavy use of advertising, in order to avoid competitive pricing with each other. Oligopolies tend to avoid competitive pricing at all costs, as the worst case scenario of this is a price war, which generally cannot be escaped, resulting in one survivor, who goes on to become the monopolist.

In 1985 G.J Coles, primarily a Melbourne-based supermarket chain, merged with Myer Ltd, an upmarket Melbourne department store, becoming Coles Myer Ltd. The merger was brought on by an expectation of significant cost savings from sharing services and overheads such as purchasing, warehousing, information technology and property. However these benefits never occurred. Coles Myer was burdened with poor management, bad strategic decisions, and internal conflict. Their share price was faltering, and lagging behind their biggest competitor Woolworths, and profit had been stagnant for three years.

A more tell tale sign is the quick ratio, or acid test, which has increased year after year. Debt to total assets has decreased over 5% since 2001, indicating less financing of current and long term debt and more company assets. Their cash debt coverage far surpasses the ideal 20%, indicating a high level of solvency with sufficient funds and assets to satisfy all debtors. Asset turnover has more or less maintained at right around 1.6, signifying a turnover rate of just less than 180 times per year.

Coles have opened its first store in the year 1914 by the father of GJ Coles. The former sign of the store is “Nothing over 1/-“, the first store location is located in Smith St. Collingwood in Australia. In history the genealogy of the Coles is actually started in their grandfather who also bears the name GEORGE (a gold miner during the gold rush time in Victoria). GJ as often referred to as George after graduating in middle school have been moved out of places in Australia to find a greener pasture to his family.

Coles is an Australian Supermarket chain owned by Wesfarmers. It is a retailer of food, liquor and convince in Australia. There are more than 102,000 team members across all brands including Coles express, 1st choice liquor superstore, Coles and Bi-Lo supermarkets, liquor land, vintage cellars and spirit hotels.

According to Coles' parent group Westfarmers, the supermarket giant had a modest increase of 2.1 percent in its first quarter sales, from $9.23 billion last year to $9.43 billion in 2015, reported Perth Now. Comparable food and liquor store sales were in line with analysts’ expectations and rose by 3.6 percent. Coles’ managing director described its first quarter results as "pleasing and with good momentum" that's expected to continue until

Also, according to its leverage ratios, the company’s debts are not only very high, but are also increasing. Its decreasing TIE ratio indicates that its capability to pay interests is decreasing. The company’s efficiency ratios indicate that despite the fact that its fixed assets are increasingly being utilized to generate sales during the years 1990-1991 as indicated by its increasing fixed asset turnover ratio, the decreasing total assets turnover indicate that overall the company’s total assets are not efficiently being put to use. Thus, as a whole its asset management is becoming less efficient. Last but not the least, based on its profitability ratios, the company’s ability to make profit is decreasing.

Woolworths is the major supermarket grocery store chain in Australia, owned by Woolworths Limited. Woolworths is an incorporated public company, listed on the Australian stock exchange. This company has incomplete permissible responsibility through its shareholders and lies in the tertiary industry and retail sectors. Through their authoritative organization strategies and processes Woolworths has been able to make available to its 1.3 million customers a level of service, expenditure and manufacturing available across their franchise stores located across Australia. Woolworths' function as one of the largest public companies is obvious through its nature of management. This report will explain the nature and responsibilities of management in light of Woolworths.

Coles Supermarkets Australia Pty Ltd (Coles) is part of the Coles Group owned by Wesfarmers. The Coles Group provides variety of products included national full-service supermarket retailer, liquor retailer and national fuel and convenience operator (Wesfarmers, 2016). Coles supermarket is one of the major grocery and retail supermarkets operating in Australia. Products sold in the supermarket consists of dry and packaged food products, alcoholic and non-alcoholic beverages, tobacco, and household products (IBISWorld, 2016).

Wesfarmers took the advantage of the opportunity by acquiring the retail giant Coles in 2007. Further, they increased the brand value of Coles by focusing on innovation and freshness, simplifying the supply chain and its operations thus increasing in their revenue growth. Also they under took venturing into new channels like a joint venture with GE Australia, expanding the current network by opening five new Kmart stores across Australia and three new Kmart tyre and auto services to increase the sales. They also launched eight foodservices superstore in

The debt-to-capital ratio gives users an idea of a company's financial structure, or how it is financing its operations, along with some insight into its financial strength. The higher the debt-to-capital ratio, the more debt the company has compared to its equity. Star River has always depended much on debt for its financing and the trend shows this ratio may get higher in future. Star River, with high debt-to-capital ratios, compared to a general or industry average, may show weak financial strength because the cost of these debts may weigh on the company and

The Debt-Equity Ratio shows that most of the capital was in terms of ordinary shares and is becoming more reliant on Shareholders Equity than on debt to finance operations.

Woolworths Limited is a big Australian company with vast retail interest throughout Australia and New Zealand. It is the second largest company in Australia by earnings and the second largest in New Zealand. furthermore, Woolworths Limited is the biggest takeaway liquor retailer in Australia and the largest retailer in the world dated in 2008.