Woolworths Limited (ASX: WOW) used to be a dependable blue chip stock with its market leading margins on supermarket products, reliable profits from Big W, its stable of alcoholic stores, the potential of Masters and its group of hotels.
However, Woolworths is not the growth machine it used to be. Here are three reasons why I think you should sell your Woolworths shares:
Declining margins
Woolworths' high margins were impressive but were also one of the main reasons behind its recent decline. Food prices were seen to be too high and lower priced competition like Aldi and Costco stole market share.
Woolworths has had to lower prices to become competitive again, which lowers revenue and profit.
No growth in most areas
Most of Woolworths' businesses are going backwards. Big W is struggling, the hotels aren't growing and the one big hope was Masters which was a disaster, costing the group billions of dollars. If none of the businesses are growing, Woolworths can't grow profits or dividends.
Amazon
Amazon is supposedly opening its doors in Australia in 2017, which could be terrible news for Woolworths. Amazon Fresh could steal market share from the supermarket and Big W could be in even more trouble because they sell similar products to Amazon.
Foolish takeaway
When share prices are down because of temporary reasons, it can be a great time to buy shares, such as private hospital operators Healthscope Ltd (ASX: HSO) and Ramsay Health Care Limited (ASX: RHC), but I don't think this is the case for Woolworths. When a business' profitability appears to have been permanently reduced, it might be time to move on.
