Why have the Coles (COL) and Woolworths (WOW) share prices stumbled?

Posted: 10 January 2022 12:35 pm
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Shares in the 2 retailers are down 4-8% over the last month despite being the major COVID-19 winners.

Shares in major retailer Woolworths (ASX: WOW) are among the most traded stocks on the ASX on Monday, but are down 1.1% to $36.97.

While main rival Coles shares (ASX: COL) are also down nearly 1% at $17.18.

What is weighing on the Supermarkets' share prices?

Surging COVID-19 cases are having a negative impact on both retailers.

In market updates, the supermarket giants are reporting staff shortages of 30-to-35% at their stores and distribution centres due to COVID-19 isolation requirements.

That is leading to an escalating supply chain crisis for essential goods such as food and pharmaceuticals.

The problem is most severe in New South Wales and Victoria, which are reporting the maximum number of coronavirus cases.

Both supermarket operators have already imposed restrictions on the purchase of several items, as well as on online orders.

Woolworths CEO Brad Banducci on Monday sought to quell concerns about supermarket shelves being left bare but also warned supply issues would likely last for the next 2 to 3 weeks as we await the predicted peak of Omicron cases.

"There is enough product in our supply chain to meet the needs of our customers, it might not always be their favourite brand unfortunately," he told the ABC.

Coles chief operations officer Matt Swindells has also said that it will likely take the supermarket chain a few weeks to fully recover from the supply disruptions.

Earnings hit

The current disruptions are a setback for investor expectations for a repeat performance from the early stages of the pandemic, when both supermarkets had seen a surge in sales as customers stocked up ahead of lockdowns.

Instead, both operators are likely to forego earnings at one of the busiest times of the year, which could have an impact on the bottom line of the 2 retail bulwarks.

Woolworths has already recently flagged a hit of $220 million for the first half of this financial year on account of additional costs to maintain a COVID-safe store and distribution network, and due to disruption of stores and distribution centres, prompting analysts to downgrade earnings expectations.

Investors now fear the current crisis will build on this earnings hit, which could risk a downside in the share price for the 2 companies. Woolworths shares are already down 8% in the last month alone, while Coles has lost about 4% of its value in the same period.

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Considering buying WOW or COL shares?

If you are keen to buy shares in Woolworths or Coles, consider investing through an online share trading platform.

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