SALES' FIGURES

With Q1 sales' results having been announced this morning, the market is likely to react negatively to CML's latest numbers.

Whilst this morning's sales results show an overall growth of 7.3% q on q, the disclosed results demonstarte that growth was higher earlier on in the quarter, and lower, towards the end of the quarter.

Measured against analyst forecasts, CML's results were on the lower side of expectations.

Significant for CML this time round was the following:
1)
Myers /Grace stores sales were down;
2)
Target was up (and above expectations);
3)
food and liquor results whilst up 7.3% on the quarter, confirmed the continuing inroads being made by WOW into CML's mainstream business areas, with the petrol loyalty scheme apparently being cited as a major indicator of WOW's continuing success over CML.

Conversely, if John Fletcher were to walk down the aisles of a typical Safeways supermarket, he would see a business which:
1)
is continually stocking on perishables; and
2)
has reduced the frequency of re-stocking on non-perishables.

Collecting the revenue before having to pay the suppliers is a good way of preserving margin value. So too is the notion of carrying limited inventory. If it works, margins can either be preserved, or enhanced, even in the face of stiffening or embraced competition.

But, in order for such a strategy to work, the logistics management system (in terms of stock re-ordering capability, warehousing, supplier relationships, and transportation and delivery musta ll be spot on).

In each of these areas, WOW is currently ahead on points, but is especially so in relation to its IS/IT system for re-ordering and stock management. In this particular area, CML standas widely exposed, and has been so since the early to mid-90s.