Fund manager Clime Capital Ltd (ASX: CAM) has considered whether the Woolworths Group Ltd (ASX: WOW) share price is a buy.
Woolworths was founded in 1924 by Percy Christmas, its first store was opened in Sydney’s Imperial Arcade. Woolworths is Australia’s largest supermarket business, it operates Woolworths supermarkets in Australia and Coundown in New Zealand. It also runs the retail department store Big W. With over 3,000 stores and more than 200,000 employees it’s one of Australia’s largest employers.
Is The Woolworths share price a buy?
Clime Capital is a listed investment company (LIC), it shared an opinion piece of the Livewire site considering if the Woolworths share price is an opportunity.
Whilst the market was initially disappointed with Woolworths’ half year result, Clime noted that the share price quickly recovered to around $30. Does that mean there’s nothing to worry about?
Clime says no, due to several issues.
The fund manager said that the business is not as defensive as people think, particularly because management have said the company cannot overcome the subdued retail environment.
Clime thinks the business is working hard just to maintain its earnings with suppliers wanting to increase prices and expected wage increases.
Woolworths has done well to improve its reputation recently as having competitive prices, but it apparently still lost market share with Aldi continuing to expand. Clime expects the profit margin to fall in the second half.
The business’ other segments like Dan Murphy’s and Big W are struggling to grow with increasing online competition.
One bright spot is the success of Woolworths’ smaller Metro store format, which it now has 34 of.
What share price would Clime buy Woolworths at?
Clime said that Woolworths has a strong balance sheet and excellent cash conversion. And an exit from Big W would improve group margins. But, Clime is uninterested in investing in Woolworths shares until the share price has fallen under $28.
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