The latest sales update from Wesfarmers Ltd (ASX: WES) is bad news for its archrival Woolworths Limited (ASX: WOW) as it shows the latter has yet to stem the bleeding.
It's no surprise to see Wesfarmers' share price jump 0.5% to $40.89 in late morning trade, while Woolies headed south by 0.8% to $26.74.
Food and liquor sales at Wesfarmer's Coles supermarket chain jumped 4.7% for the three months to September as comparable food store sales (which only accounts for supermarkets that have been operating for more than a year) increased 4% over the period.
The growth is ahead of the total industry and reflects greater market share by Coles, which probably comes at the expense of Metcash Limited (ASX: MTS) and Woolies.
That is disappointing news to shareholders in Metcash and Woolies which have both invested heavily to win back shoppers. This shows their strategies have so far failed to have much of an impact even as Woolies invested over $200 million to lower grocery prices over the past eight months.
There's more bad news for Woolies as Wesfarmers' hardware chain Bunnings continues to leave Woolies' embattled Masters retail outlets in the dust. Sales at Bunnings are up 11.6% in the first quarter of the financial year.
Wesfarmers other retail outlets have also reported pleasing results. Its "problem child" department store, Target, actually managed to register a 3.1% increase in sales to $776 million for the quarter thanks to its "Higher Quality. Lower Prices. Every Day" strategy.
All categories in Target grew, particularly women's and children's wear, and shoppers are responding well to its refurbished stores.
What's more, its discount retailer Kmart and its office supplies chain Officeworks have also reported good sales growth of 12.5% and 6.5% respectively.
Woolies must be feeling frustrated as the gains probably come at the expense of its Big W department store business. Woolies is losing on just about every front!
There are a few blemishes in Wesfarmers' update though. Its petrol stations continue to struggle with sales falling 7.8% to $1.8 million due to falling fuel prices.
But even discounting the lower fuel price, the performance of the division is disappointing as fuel volumes are down 1.4% despite strong discounting and the opening of four new stations.
Liquor sales at Liquorland are another dark spot for the conglomerate. While Wesfarmers didn't break out the sales figure for liquor, it is clear that the business is still struggling and hasn't yet turned a corner.
But these are relatively minor points as these businesses probably represent around 20% of group sales and will not change the fact that Wesfarmers is still the best listed supermarket stock you can own given that the turnaround in Woolies is still probably 12-18 months away and the survival of Metcash can't be assured.
