Woolworths vs. Coles · Accounting Analysis · Disclosure Strategy
In September 2023, a masked activist defaced Woolworths and Coles stores across Australia — labeling Woolworths "The Price Gouge People" and Coles "Down, Down, Morality Down" — igniting a national debate about supermarket pricing amid Australia's worst inflation in two decades. Both chains reported record profits the same month. As an Investor Relations Associate, the challenge was to determine, using five years of accounting data, whether those profits stemmed from price gouging or from legitimate volume growth — and then decide whether and how to disclose that finding to investors and the public.
Analyzed FY19–FY23 income statements, balance sheets, and cash flow statements for both Woolworths Group and Coles Group — computing and comparing liquidity, activity, profitability, and solvency ratios across both companies. The key question was whether Woolworths' margin expansion told a price gouging story. Findings were synthesized into a C-suite internal memo advising the Chief Relationship Officer on a proactive disclosure strategy, followed by a full external press release.
Coles and Woolworths control over two-thirds of Australia's grocery market — a duopoly that gives both chains enormous leverage over suppliers and consumers. In 2023, Australia was navigating its most challenging economic environment in a generation: inflation reached 6.2% in June 2023 (the highest in over two decades), RBA interest rates spiked from 0.1% to 3.25%, housing costs surged, and post-COVID supply chain disruptions drove double-digit increases in meat, vegetables, and dairy prices.
Against this backdrop, Woolworths reported A$12.96 billion in Q1 food retail sales (up 6.1%) and A$929M in half-year supermarket profits (up 2.5%). The public question: were Australians paying more because Woolworths was exploiting the crisis — or because more households, squeezed out of restaurants and specialty shops, were simply buying more groceries?
This case study takes the role of Amelia, a first-year Investor Relations Associate, tasked with using accounting analysis to answer that question and recommend a disclosure path to Woolworths' Chief Relationship Officer.
FY19–FY23 comparative ratio analysis. If Woolworths were price gouging, we'd expect diverging margins — higher GPM and NPM than Coles over time.
* FY22 NPM spike reflects the one-time gain from the Endeavour Group demerger — not recurring operations. Continuing operations NPM was ~4.4%.
Four data-driven findings that refute the price gouging claim — derived from the FY19–FY23 comparative ratio analysis.
Woolworths' GPM dipped to 26.7% in FY23 from 29.7% in FY22. If price gouging were occurring, margins would be expanding — not contracting. Coles GPM remained flat at ~26%.
✓ No Evidence of GougingWoolworths' NPM collapsed from the FY22 anomaly (Endeavour demerger) to 2.53% in FY23 — nearly identical to Coles at 2.71%. Two companies price-gouging simultaneously is implausible.
✓ Industry Parity ConfirmedWoolworths' Cost of Sales grew 10.07% in FY23, significantly outpacing revenue growth of 5.66%. Higher costs were absorbed — not passed on — indicating margin compression, not exploitation.
✓ Cost Absorption EvidentInventory turnover remained consistent (~12–13×) across both companies, with similar average days in stock (~28–29 days). No evidence of supply manipulation, hoarding, or artificial scarcity.
✓ Operations StableWith exonerating financial evidence in hand, the recommendation to Woolworths' CRO: face it head on.
Silence would fuel distrust and invite regulatory escalation. Since the financial data validates Woolworths' integrity, the company has a rare opportunity to turn a reputational crisis into a trust-building moment by getting ahead of the narrative with transparent data.
Written as Amelia, Investor Relations Associate — an internal memo to Woolworths' Chief Relationship Officer.
The recent claims about price gouging and being morally bankrupt have ignited public debate about our pricing practices and threaten our brand reputation and customer trust. However, our key findings from our financial ratios compared with Coles refute these claims. We should proactively disclose these findings to our customers and investors for transparency and commitment to affordability.
The accounting analysis of Woolworths in comparison with Coles (FY19–FY23) data reveals no evidence of price gouging. Our Gross Profit Margin dipped to 27% in 2023 from 30% in 2022 while Coles GPM remains consistent at 26%. Moreover, our Net Profit Margin has significantly declined from 13.06% in 2022 to 2.53% in 2023, which is almost the same as Coles (2.71% in 2023).
Our Cost of Sales rose to 10.07% in 2023, outpacing our revenue growth rate. Inventory turnover remained stable. Given the economic situation and the accounting analysis, we can conclude that the higher profits were from increased sales volume — not inflated pricing or margin expansion.
Since our financial data validates our integrity, we should issue a public statement immediately — silence would fuel distrust and may invite regulatory escalation. I recommend approving the attached press release so we can turn criticism into trust.
Sincerely, Amelia — Investor Relations Associate
PDF · Internal Memo & External Press Release
PDF · 8 Pages · Prof. Kristian D. Allee · University of Arkansas
Excel · 5-Year Comparative Financial Data