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2016-08-22 07:03:40

Aldi to grow by 16 per cent a year Aldi's aggressive expansion has reduced Coles and Woolworths' share of the lucrative grocery market from 75 per cent to closer to 70 per cent despite fierce competition from the big chains, who have already "borrowed" some of the best ideas from the discount operators' playbook. Retail analysts claims Coles and Woolworths have already cut their ranges and sharpened pricing on private labels in a bid to compete with Aldi and ensure shoppers still pop into one of the big chains for part of their shop. Moody's Investors Service claims Aldi's share will increase as it ramps up its store rollout in South Australia and Western Australia and drives investment in advertising and marketing. "We expect Aldi to expand its store base by around 16 per cent per year over the next two years," Moody's says. "In contrast we expect Coles and Woolworths to increase their store numbers at a growth rate of below 3 per cent." Moody's said Aldi's expansion into new states built its market without eating into its existing network. "Each new store can take market share without cannibalising other Aldi stores, a dynamic Coles and Woolworths do not benefit from, owing to their existing nationwide footprints and higher store densities." Moody's said Aldi's expansion had contributed to falling prices at Coles and Woolworths, which have dropped by between 1.5 per cent to 2 per cent in the past 12 months. "We expect the significant rollout of new Aldi stores, combined with the increase in marketing spend, to result in continued competition and price deflation, negatively impacting the comparable same store sales of Ray Ban RB4170 Sunglasses Grey Frame Grey Gradient Lens
Ray Ban RB4170 Sunglasses Grey Frame Grey Gradient Lens its competitors [Coles, Woolworths and IGA] over the next two years," Moody's says. Coles and Woolworths have already taken on some of Aldi's strategies to boost sales, but Morgan Stanley analyst Tom Kierath said that while Aldi kept its margins down the risk of a new arrival like Lidl was low. Mr Kierath said Aldi's success was partly a reflection of Woolworths' poor performance and its focus on building its margins. "If they [Aldi] took their margins up to 5 or 6 per cent, Lidl would come in and take the low margin space," Mr Kierath said. "If Woolworths had kept its margins at 4 per cent, Aldi wouldn't have been anywhere near as successful as it has." Woolworths chief Brad Banducci revealed on Monday plans to shut 27 of its poorest performing stores and there are 34 other stores likely to be closed down once their leases fall due. These closures are part of a $1 billion restructure plan for Australia's biggest supermarket chain unveiled by Woolworths' management team earlier this week. It includes 500 job losses from the operation's head office and supply chain. Moody's said the significant restructuring costs along with its weaker earnings outlook, which will be lower than consensus estimates would not have an impact on Woolworths Baa2 negative rating or outlook. It said the cash costs for the restructuring as well as the lower earnings were negative, but the "strategy and actions announced are supportive to the company's credit profile", Moody's said.

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