Wesfarmers Limited Announced The Acquisition of Catch Group

Australia’s leading retailer, Wesfarmers Limited (ASX: WES) has announced the acquisition of Australian online retailer, Catch Group Holdings Limited for a total value of $230 million.

On 12th June 2019, Wesfarmers communicated that it has entered into an agreement to acquire Catch Group Holdings Limited, as per which, Catch Group will operate as an independent business unit under the leadership of Ian Bailey, who currently is the Managing Director (MD) of Kmart Group.

The acquisition of this established, profitable and cash-generative business is consistent with Wesfarmers’ disciplined approach to capital allocation. The decision of acquiring Catch Group Holdings Limited, which operates an online business model offering branded products, is in line with the Wesfarmers’ focus on investing in and building its data and digital capabilities. According to Wesfarmers’ Managing Director, Rob Scott, this will help Wesfarmers and Kmart Group to fast-track their digital and e-commerce capabilities.

Despite the update, the share price of the company witnessed a decline of 0.804% during the intraday trade as on 12th June 2019.

Recently, Wesfarmers announced the appointment of highly experienced Sharon Warburton, bringing valuable, complementary and diverse experience to the Wesfarmers Board. Ms Warburton will join Wesfarmers Board at a time when the company will be actively exploring opportunities to deploy capital to produce attractive shareholder returns, and her appointment will further strengthen the Board’s mix of skills, experience and knowledge and continue an orderly process of balancing renewal and continuity.

Wesfarmers is in the process of acquiring Kidman Resources Limited (ASX: KDR), and in this regard, it has recently entered into a Scheme Implementation Deed (SID) with Kidman Resources to acquire all the shares in Kidman, following a completion of Wesfarmers’ due diligence and the satisfaction of conditions to the Process and Exclusivity Deed with Kidman.

Now, let’s have a quick look at how the company’s shares have performed lately. At market close on 12th June 2019, the stock was trading at a price of $38.250, down 0.804% during the day’s trade with a market capitalisation of ~$43.72 billion. The stock is trading at a PE multiple of 7.900x, with a dividend yield of 5.71%. The company’s stock has provided a year-to-date return of 25.79% and in the last six months, the stock has exhibited a return of 27.77%. Its 52-week high price stands at $38.800 and 52 weeks low price at $29.537, with an average volume of ~2,313,915.

Coles Group Limited

Australia’s another major retailer, Coles Group Limited (ASX: COL) is trying to establish partnerships to make the life of its customers easier. Recently, Coles entered into a partnership with Ocado, a disruptor of the grocery market and a global leader in online end-to-end solutions, to add convenience for online grocery customers in Australia and enjoy a seamless digital customer experience, greater range, improved product availability, freshness and more delivery windows.

In the third quarter of FY19, (2019 March Quarter) Coles delivered a solid outcome with Supermarket sales growth of 3.2%, Coles Online growth of 27% and strong growth in Coles Express food-to-go segment.

Third quarter results of Coles for FY19 (Source: Company Reports)

Strategic Milestones During Third Quarter

• The company commenced the New Alliance Agreement with the fuel partner of Express, Viva Energy, for restoring growth in the Express business and better align both parties.
• Making life easier for customers by commencing trials with Uber Eats and eBay.
• Entered into a strategic partnership with Optus for the delivery of high-speed broadband to all stores, allowing the company’s business to become more digitally enabled and enhance the customer experience.
• Signed a JV agreement with Australian Venue Co with regards to Coles’ hotel and retail liquor business in Queensland.

Now, let’s have a quick look at how the company’s shares have performed lately. At market close on 12th June 2019, Coles’ stock was trading at a price of $13.210, up by 1.694% during the day’s trade with a market capitalisation of $17.33 billion. The stock is trading at a PE multiple of 23.480x. The company’s stock has provided a year-to-date return of 10.93% and exhibited a return of 4.67% for the six month period. Its 52-week high price stands at $13.370 and 52 weeks low price at $11.120, with an average volume of ~2,557,547.

Woolworths Group Limited

Coles and Wesfarmers’ major competitor, Woolworths Group Limited (ASX:WOW) recently announced a strategic partnership with a leading subscription-based meal kit provider, Marley Spoon, which includes a $30 million investment in Marley Spoon by Woolworth. Under the terms of the strategic partnership, both the companies will work in tandem to grow the Marley Spoon and Dinnerly brands in Australia, while benefitting from Woolworths’ deep industry experience.

In the third quarter of FY19, Woolworths witnessed an improvement in sales momentum with Australian Food sales rose 4.7% and Endeavour Drinks sales grew 6.4% during the period as compared to the same quarter last year. During the quarter, the group opened four new stores, closed two stores and made five upgrades.

Third Quarter Sales (Source: Company Reports)

Now, let’s have a quick look at how the company’s shares have performed lately. At market close on 12th June 2019, Woolworths’ stock was trading at a price of $32.200, up by 0.468% during the day’s trade with a market capitalisation of ~$40.34 billion. The stock is trading at a PE multiple of 24.200x, with a dividend yield of 2.96%. The company’s stock has provided a year-to-date return of 9.95% and in the last six months, the stock has yielded a return of 12.85%. Its 52-week high price stands at $34.840 and 52 weeks low price at $27.030, with an average volume of ~3,918,668.

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