The Australian Bureau of Statistics, with its Inflation Surge data, evoked a knee-jerk response with consumer stocks on the ASX getting the maximum hit.
The May monthly CPI data quashed all hopes of an early rate cut. Prices rose 4% year-on-year, marking inflation’s third consecutive rise and the highest jump in prices since November. In fact, with Australian inflation moving in other direction than envisaged, economists have started reckoning the possibility of a rate hike.
The run up to July is not going to be easy with new cost-of-living relief and tax cuts coming into force next month. These measures may encourage new spending even as the Reserve Bank of Australia tries to tighten households' purse strings.
Such an environment offers an opportunity to invest in some high quality stocks, which are likely gather momentum after this period of temporary uncertainty.
Woolworths Group Limited (ASX: WOW)
Woolworths Group Limited (ASX: WOW) in its Q3 FY24 sales update on 2 May 2024 reported total group sales of $16.8 billion, reflecting a 2.8% increase compared to the same period last year.
Woolworths Food Retail experienced a 1.3% increase in total sales for the quarter (2.5% excluding tobacco), reaching $12.44 billion, or 1.5% on an adjusted basis.
E-commerce continued to demonstrate strong growth, with sales rising by 18.4% to $1.53 billion and penetration reaching 12.4%, an increase of 178 basis points compared to Q3 FY23 and 46 basis points compared to Q2 FY24. Sales at Woolworths Metro Stores (store-originated) rose by 2.6% to $397 million.
Woolworths Food Company’s Own and Exclusive Brand sales grew by 2.3% in Q3, with item growth of 1.8% as customers increasingly opted for the value offered by own brands. Long Life sales saw a 5.6% increase, driven by strong performances in Pantry, Frozen Foods, and Household Care categories. Fresh sales increased by 1.8%, with notable strength in Bakery, Seafood, and Everyday Chilled products during the Easter trading period.
During the quarter, Woolworths completed seven supermarket renewals, opened two new supermarkets, closed one supermarket, and opened one new Woolworths Metro Food Store. By the end of the quarter, the total network consisted of 1,002 Woolworths Supermarkets, 104 Woolworths Metro Food Stores, 719 Direct to Boots locations, seven Customer Fulfilment Centers (CFCs), three eStores, and 56 Mini Woolies.
The company is committed to transforming its supply chain network over the coming years. This transformation will involve a period of site commissioning and ramp-up.
Woolworths maintains a dominant market position, enabling stable and consistent monetary output to its stakeholders while achieving notable growth rates despite its extensive scale of operations. Its upcoming automation projects and ongoing supply chain optimization efforts are expected to enhance the company's long-term return-generating prospects.
REA Group Ltd (ASX: REA)
REA Group Ltd (ASX: REA) (REA Group) has released its financial results for the nine months ending on March 31, 2024, as reported by News Corporation (ASX: NWS). The report from News Corp includes US GAAP financial information for REA Group and its subsidiaries. Notable financial highlights for the Group's core operations during this period include a revenue of $1,060m, marking a 20% year-on-year increase, and an EBITDA (excluding associates) of $616m, reflecting a 24% growth. In the third quarter, revenue experienced a significant growth of 24% to reach $334m, primarily driven by strong performance in the Australian Residential and Commercial sectors, as well as revenue growth in India. EBITDA (excluding associates) also saw a notable increase of 30% to reach $177m.
REA achieved exceptional performance due to significant yield growth and the advantages of a more stabilized listings market. This resulted in a strong uptake of its premium products as customers sought to leverage its leading audience to maximise their campaigns in the strengthening market.
The Australian property market has normalised with improvement in new lending. Increased buyer enquiries are demonstrating strong demand.
REA is well positioned with property market continuing to benefit from the belief that interest rates have reached, or are near the peak, providing buyers and sellers with confidence.
The company has a strong development pipeline and endeavors to deliver new products that will continue to drive growth.
Source: Company's Report
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