Shareholders of Woolworths Limited (ASX: WOW) have endured a tough run over the last 14 months or so with the shares falling from an all-time high to a near three-year low. The stock trades at just $28.17 today, down from a high of nearly $39 per share in May last year.
Bruce Jackson, General Manager of The Motley Fool Australia, said on Wednesday that: "The competitive threat to Woolworths has never been greater." Indeed, the retailer has been the dominant force in Australia's gigantic grocery market over the last two decades but its position is now being compromised by the likes of Coles, owned by Wesfarmers Ltd (ASX: WES), as well as Aldi and Costco.
In large part, Woolworths' recent demise has come as a result of its focus on building its Masters Home Improvement chain. Management has admitted fault for taking their attention away from the core Food and Liquor segment in an attempt to compete with Bunnings, which is also owned by Wesfarmers – a move that has thus far been constantly criticised by investors.
So far, the Masters joint venture with Woolworths' US-based partner Lowe's Companies has cost the company billions of dollars in capital while it has also racked up hundreds of millions of dollars in losses, despite a strong lift in sales in recent quarters. Those funds could otherwise have been allocated to improving efficiencies within its supermarkets and passing on lower prices to customers to maintain its share of the market.
Despite these issues however, Woolworths is currently searching for a new CEO following the departure of Grant O'Brien earlier in the year, whereby a new leader could help return the company to greatness.
Indeed, further falls in the near-term are certainly possible and Woolworths is by no means a risk-free investment, however, it could also be a great long-term pick-up at its current price – especially with a forecast 4.9% fully franked dividend yield.
