15 year return on WES and WOW

Yesterday we had a look at the 10 year returns on the big four banks.  Today we'll go back further say to 15 years and have a look at Wesfarmers (WES) and Woolworths (WOW).
It is not really a comparison of retailer vs retailer since WES bought Coles in 2007 so has only been a retail play for half of the time frame.

Source: Google Finance

From 2004 to 2007 WOW was in a sweet spot.  Markets were rising, competition from Coles was poor and their margins were world class.  The share price responded accordingly.

WES bought Coles in October 2007 shortly before the GFC.  As can be seen on the graph WES was belted during the GFC needing to raise significant capital where as WOW held steady for a number of years.

With the GFC over WOW has headed sideways.  Times were changing and WOW no longer had the grocery market to themselves.  Coles were improving, Aldi and Costco were expanding.  WOW was not adapting enough to the ever changing market.

And so we get to the far right of the graph and the WOW share price is declining where as WES is holding steady.  The Masters hardware venture is a disaster for WOW and same store grocery sales are in decline.

For WES their stores have run in cycles.  Coles and Kmart were in the doldrums in 2007 and now show promising growth.  Target was doing well in 2007 before earning its "problem child" status.  Bunnings is the exception and continues to show incredible growth.

Whether the problems at WOW are structural or cyclical is the key question.  It's also worth remembering that over 15 years its share price is up 270% with a lot of dividends thrown in as well.