Retail in the spotlight

OPINION: There is no shortage of competition between Woolworths and Wesfarmers, whether it be in supermarkets, liquor, discount department stores or now hardware.

In that context, investors will be interested to hear Woolworths's view on whether it will be able to maintain its high margins and competitive standing at its annual meeting in Sydney today.

On Tuesday, Wesfarmers led analysts on a tour of its Coles food and liquor operations in Melbourne, and most came away pretty impressed with the progress under the management of Ian McLeod.

Even Merrill Lynch's David Errington, who was rated the top analyst in Australia in any sector in a recent Asiamoney survey, said Coles' new store format was appealing and it had ''materially upped the ante'' in liquor. He raised his price target on Wesfarmers to $25 from $21, albeit mostly on the improving outlook for coal, along with higher forecast margins for Target and Kmart.

It will be interesting to hear whether Woolworths reports any more progress on the success or otherwise of its recent loyalty card revamp that offers Qantas frequent flyer points. Some in the market think it is a great idea, while others find it expensive for the retailer.

Coles has not fought back with a similar airline tie-up. The word is its management team thinks only upper-income shoppers prefer frequent flyer points as a reward, whereas it is more interested in tailoring any loyalty offering to the 80-or-so per cent of families in the middle and lower income groups.