UBS tips off Woolworths on staff levels

Brokerage UBS has flagged labour costs as a key area where Woolworths can gain ground on Coles in profitability.

Analysts say Woolworths can deliver the better metrics. Picture: AFP

Brokerage UBS has flagged labour costs as a key area where Woolworths can gain ground on Coles in the profitability stakes, noting a $340 million opportunity for the retailer.

In a note to investors, UBS extended on its recent research into understanding why Coles’s profitability metrics were ahead of its bigger rival.

Given Woolworths’ size and scale benefits, analysts headed by Ben Gilbert contend there is no structural reason why Coles should outperform, with Woolworths in the box seat to deliver the better metrics.

Its failure to do so could, in part, be explained by Woolworths’ higher staff levels, with a spot check by UBS finding Coles, on ­average, has three to four fewer staff per store, albeit off a small sample size.

“(This is) equivalent to a greater than $340m opportunity for Woolworths if, over time, it is able to optimise labour via cycling ­‘material’ increases in store training and undertaking more ‘forensic’ customer-led rostering,” Mr Gilbert wrote.

“In reality, the likelihood is Coles needs to invest more and Woolworths less, albeit it does ­appear to be an opportunity for Woolworths.”

A Coles spokesman last night dismissed the research, pointing to the “small and unrepresentative sample of fewer than 1 per cent of stores”.

“Coles continues to lead the market in value, and at the same time we are investing significantly in our customer service offer,” the spokesman said. “The average Coles supermarket employs around 100 team members and we have invested more in customer service this year than last year.”