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Is it time to give up on Woolworths Limited shares?

It has been a tough 12 months for Woolworths Limited (ASX: WOW) and its shareholders. The company has lost a quarter of its market value during this time after a failed foray into the hardware sector and increased competition from the likes of Costco and Aldi hurt its earnings prospects.

There will no doubt be many investors which have held firmly on to their shares in the hope of a turnaround. But will there be one coming soon?

I believe Woolworths will find its legs again, but I’m not sure if it will be during the current fiscal year. But one thing that I am sure about is that we will certainly know more next week when the company releases its quarterly results.

Wesfarmers Ltd (ASX: WES) released its own third quarter results last week. It impressed the market when it reported same store grocery and liquor sales increased by 4.4% year-over-year. In such a saturated market this could be a sign that it has stolen market share away from Woolworths.

If this proves to be the case then I wouldn’t be surprised to see the Woolworths share price dragged down even lower.

Further compounding Woolworths’ misery is the knowledge that recent research by Roy Morgan shows that Aldi grew its market share from 11.6% to 12.1% in the final quarter of 2015. Aldi’s growth came at the expense of Woolworths which lost 1.2% of its market share, dropping to a 37.3% share.

One further kick in the teeth could be the arrival of Amazon onto Australian shores. There has been speculation that the company will open up a full e-commerce website soon, which could well include groceries.

Admittedly it doesn’t command a meaningful share of the U.S. groceries market yet, but it is growing fast. Recent research estimates Amazon’s groceries segment to have grown by 18% year-over-year.

So should you give up on Woolworths now? I believe it is worth holding on if you have a long investment time horizon. I have little doubt that its management team has learnt some valuable lessons this year and the company will be better for it in the long run.

But I personally wouldn’t want to start an investment in the company’s shares just yet, as there are better blue chips like this one to invest in. I feel it would be best to wait until Woolworths’ third quarter report is released next week and see if things are improving.

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Motley Fool contributor James Mickleboro has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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