For shareholders in Woolworths Limited (ASX: WOW), one of Australia's most widely owned blue-chip stocks, 2014 hasn't been a great year.
With less than 20 trading days left in the calendar year, the nation's largest retailer is currently on track to end 2014 down over 7%. In contrast, the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) is set to eke out a tiny gain of less than 1%.
Better luck in 2015?
Part of the cause of Woolworths' underperformance has been investors' concerns over the increasing losses being bled by the Masters Home Improvement business. These concerns appear justified and whether the company will ever achieve a reasonable return on invested capital from this business is a subject of intense debate. It's possible that by next year, management will manage to stem the flow of losses, however with a massive roll-out program underway, I wouldn't be holding my breath.
While the performance so far of Masters will no doubt lead to sceptics regarding the latest initiative to grow the company, other investors will no doubt be excited by Woolworths' Chinese acquisition and its growth potential.
Summergate acquisition
This week it was reported that Woolworths had acquired China-based wine and drinks distributor Summergate Fine Wines and Spirits. According to reports, Summergate is a leading Chinese distributor with approximately 80 global brands in its portfolio.
While it's a small step, many investors will view it positively.
Firstly, it remains within the group's core circle of competence – food and liquor. As the media release noted, Woolies is Australia's leading drinks business therefore the group is leveraging its skill-set of distribution, retail and brand management into another country, as opposed to branching out into a new sector as it has done via Masters with hardware.
Secondly, the obviously higher growth rates available in China are appealing and early movers into the nation stand could stand a higher chance of ultimate success, albeit with higher risks involved.