No wonder shares in Coles and Woolworths soared to record highs late yesterday – a major potential rival from Germany has quit before it got around to opening a store in this country.
Coles shares jumped 3.04% to close at an all-time high of $16.62 while shares in Woolies leapt 3.2% to end the day at an all-time high of $41.32.
Oddly shares in Metcash, the third listed supermarket linked company on the ASX didn’t move and closed steady at $2.65.
Metcash was seen as perhaps the supermarket based group most exposed to the entry of Kaufland and some analysts even fantasised that Metcash could have sold its grocery supply and iGA banner to the German group.
The catalyst for the sharp rise in Coles and and Woolies shares was news that German hypermarket operator, Kaufland will be making an “orderly withdrawal” from the Australian market before it even opened an outlet.
The decision to pull out came just four months after its September 2019 announcement that it was entering the Australian market. It has spent close on half a billion dollars and employed 200 people as part of its early build-up.
The German company says it will focus further on its European investments where it reckons there are better prospects – that’s hard to believe given that the EU economies are low and slow growth with weak retail sales and household spending.
Kaufland already operates in an intensely competitive German retail market where the very aggressive super discounters, Lidl and its family rival, Aldi already operate and have made life tough for established groups such as the giant Metro. Lidl is associated with Kaufland through being a part of Schwarz Gruppe.
In a fresh indictment on the Australian retail landscape, the $170 billion retailer revealed on Wednesday it had made the decision after “careful and thoughtful consideration”.
Kaufland had been set to open as many as 20 stores in Australia, 14 of which in Victoria.
It had bought a number of warehouse and retail locations around the country, including a $25 million site in Adelaide and a $459 million distribution centre in Mickleham, Victoria.
Frank Schumann, acting chief executive of Kaufland International, said the decision was not an easy one for the company and apologised for the disruption the exit would cause.
“We would also like to thank our business partners, who offered us great support over the last few years. We would also like to thank the government for being very open-minded to our projects,” Mr. Schumann said in a statement.
“In Europe, we see a great deal of growth potential. We will actively shape the consolidation of the European retail sector, thus further reinforcing our leading position.”
A couple of analysts though wonder if Kaufland has withdrawn to allow stablemate and Aldi rival, Lidl to make a long tipped move into Australia.
