Many ASX shares have suffered immeasurably in this coronavirus pandemic that has gripped our lives here in 2020. From decimated travel shares like Qantas Airways Limited (ASX: QAN) and Flight Centre Travel Group Ltd (ASX: FLT) to already struggling retailers like Myer Holdings Ltd (ASX: MYR), the economic 'hibernation' that we are currently enduring has a sadly growing list of companies on struggle street.
But perhaps the most high-profile winners of this terrible situation have been the big ASX supermarkets like Coles Group Ltd (ASX: COL) and Woolworths Group Ltd (ASX: WOW) – let's even throw IGA-owner Metcash Limited (ASX: MTS) into the mix.
These companies have been receiving some of the highest volumes of sales outside the Christmas period in their history – perhaps even including the typical Christmas rush. It has been well published that many supermarkets have been periodically stripped bare of everything from toilet paper and hand sanitiser to tinned food and pasta over the past few weeks.
Coles, Metcash and Woolworths also all own popular and prolific liquor outlets and bottle shops across the country. These too have been subject to unprecedented demand.
So with all this going on, why have the big supermarket companies not seen record share prices? Woolies shares, for instance, were trading at close to $44 in January, but are asking only $37.33 today.
Well, there are a few reasons in my opinion.
3 reasons why ASX supermarket shares are not at all-time highs
Firstly, although revenues would be going through the roof, so too would costs. Woolies and Coles are both hiring thousands of additional staff – as well as installing safety/protective equipment and even security guards across hundreds of stores around the country. These measures don't come without costs for these companies.
Secondly, whilst some parts of these businesses would be thriving, others are likely wilting. This affects mostly Woolworths and Metcash, who both own other store chains like Big W and Home Hardware. In my opinion, these other stores would be dealing with low sales and customer traffic right now, which is likely to act as a deadweight on the companies' revenues for the foreseeable future.
Thirdly, most of the food in demand has been of the non-perishable kind. If people are buying more tinned food, pasta and toilet paper now, there will likely come a point where people will stop stocking up and run down their existing stores. Woolies, Coles and Metcash might eventually see some whiplash in sales once customers realise there is plenty of everything to go around.
Foolish takeaway
So it's these reasons, in addition to the current general bear market pessimism we see in the markets, that are subduing the Woolworths, Coles and Metcash share prices from pushing on all-time highs.
It's going to be one of the craziest years for these companies in their history, but nothing fundamental to the long-term has changed in my view.
