The two largest retailers in Australia yesterday (30 April) revealed they are both poised to launch off market share buyback schemes in a bid to make tax-effective distributions to shareholders. The responses the companies got from shareholders were markedly different, however.

Giant supermarket chain Woolworths announced details of an A$344m plan to repurchase 3.7% of its issue capital, amounting to 40 million shares priced at around A$8.59 each. The news prompted share value to reach a record high of A$9.35.

At Woolworths' main rival Coles Myer, plans are also in place for the repurchase of around 30 million shares for A$200m. The retailer also revealed that it would make the payment of a special dividend of A$0.1 on 18 June, a move that will return around A$120m to investors holding shares on 23 May 2001.

Coles witnessed its share price plummet 19 cents however; as some analysts argue that the chain could issue a special dividend worth A$0.4 a share. Because of the dominance of non-food products among the several arms of the Coles group, Coles' shares are also more susceptible to the recent downturn in discretionary consumer spending, unlike Woolworths, which derives 80% of its revenue from its food business.

Despite the mixed responses to the schemes, both companies stressed that the share buybacks will not impinge negatively upon any further capital management initiatives or business acquisitions. Managing director of Woolworths, Roger Corbett, commented that further acquisition is permitted by the company's strong cash flows and balance sheet. All eyes now are on whether the Australian Competition and Consumer Commission (ACCC) will approve Woolworths' proposal to buyout 80 of the ex-Franklins stores up for sale.