Panic-buying ‘crisis’ could protect the supermarkets

The managing director of Woolworths’ Australian supermarkets arm Claire Peters has labelled the wave of panic buying a ‘crisis’.

Bare shelves at Coles Casuarina. Picture: James Owen

The managing director of Woolworths’ Australian supermarkets arm Claire Peters has labelled the current wave of panic buying a “crisis”, revealing the pace and fury of shoppers stripping the shelves as seven weeks’ worth of toilet paper supply was sold in seven days.

The mass consumer hysteria around toilet paper, now in its second week, has spread to other staples such as rice, pasta, meat, canned foods and bleach, with the spending bonanza promising to eclipse Christmas sales for the major grocery chains.

While Woolworths, Coles and wholesaler Metcash are yet to release any sales figures, a glimpse of the spike in buying was given by The Reject Shop on Monday when it said that same-store sales in the new year had accelerated more than six-fold to over 15 per cent.

Although The Reject Shop has a large presence in general merchandise and housewares, it does have some categories in common with the supermarkets, including personal healthcare, cleaning products and some foods.

Investors are certainly buying the argument that Woolworths and Coles will benefit from a sales boost over the quarter, with shares in both companies bucking the trend on Monday to rise strongly in the face of a sinking market.

Initially Coles rose 4 per cent and Woolworths was up by 1 per cent, against a 6 per cent slide in the broader sharemarket.

Coles eventually closed slightly weaker, down 17c or 1 per cent to $15.88, while Woolworths closed down 73c or 2 per cent at $36.32. This market ended down 9.7 per cent for the day.

However, Woolworths and Coles could be saddled with extra costs that could chip away at the sales spike, with Coles announcing it would employ 5000 new casuals in its stores to bolster customer service. Woolworths and Coles have also announced reduced hours, closing stores at 8pm to help staff restock shelves.

“Coles is taking all possible steps to improve the level of stock on our shelves for the community,’’ chief executive Steven Cain said on Monday.

“Our team members, suppliers and transport partners have been working as hard as possible, delivering more products to stores every day and replenishing shelves of popular products such as toilet paper, long-life pantry staples and healthcare items as quickly as possible.

“We have also significantly increased the number of team members working in our stores to support this level of unprecedented demand and we are actively recruiting for 5000 more casual team members.”

In a note to clients, Macquarie Wealth Management said the recent stimulus package unveiled by the federal government might not be enough to avoid a recession but the supermarkets’ earnings outlook could be protected.

“The (stimulus) package is a very good start, and may help to avert a “technical” recession in the second quarter, but there is a real risk that ultimately it won’t be enough. The global spread of the virus, and behavioural reactions to it mean we remain concerned that recession remains a real risk for the Australian economy,” it said.

“We see limited risk to consumer staples particularly supermarkets, Coca-Cola Amatil and Domino’s Pizza. We have upgraded Coca-Cola Amatil and Domino’s to outperform, and retain our outperform ratings on Woolworths and Coles.’’