Woolworths Limited (ASX: WOW) is a company that is getting plenty of attention from investors. This intense focus is because up until recently Woolworths has been lauded for its world class operating metrics. With the share price being smashed however, investors are debating whether the stock is a screaming buy or one to avoid.
In recent times, the high-quality tag which has been ascribed to Woolworths has been drawn into question. Investors have been upset by the value-destroying decision to enter the home improvement market and concerned by the heightened competition from a reinvigorated Coles (owned by Wesfarmers Ltd (ASX: WES)), Aldi, and Costco.
Aldi a game changer
Arguably the greatest threat to Woolworths and the key factor behind the 22.5% fall in the share price over the past year is Aldi.
According to recent findings by Roy Morgan Research published in Australian Food News, "Aldi is continuing to win over more Australian supermarket shoppers."
Roy Morgan's findings also showed that Aldi now commands a 12.1% share of the market, an increase of 0.5% on the prior year.
Around 5.3 million customers shop at Aldi's Australian stores each week. This compares with approximately 10.5 million shopping at Woolworths, 10 million at Coles, and 4 million at IGA branded stores which are backed by Metcash Limited (ASX: MTS).
What to expect next
With Aldi's expansion into South Australia and Western Australia only just beginning, there is significant momentum for the group to continue to grab a larger share of the national market. Aldi is an experienced competitor with a fast-growing footprint across Australia. There is a risk that despite the mark down in market value ascribed to Woolworths, today's share price may still not accurately reflect the intense pressure Woolworths faces.
