If you used your Melbourne Cup winnings back in 2008 to purchase some blue chip Woolworths Group Ltd (ASX: WOW) shares you’d have expected some decent gains if you’d held onto them until Melbourne Cup 2018, right?
In fact, you’ve been going nowhere pretty fast, unfortunately.
Way back on November 4, 2008, the Woolworths share price was about $29 – so if you had bet 40 to 1 on Bart Cummings and his winning racehorse Viewed, you’d have had a tidy sum to invest that day.
Fast forward 10 years later to yesterday, and the Woolworths share price closed at $29. That’s a pretty sad fact for many investors who undoubtedly expected far more from such a company – which makes its millions feeding and watering average Australians in the “reliable” consumer staples industry.
So, what went wrong, Woolworths?
The investment bible tells us past performance is no guarantee of future returns, but still, if you invested in Woolworths shares now for the medium to long term you’d certainly expect some capital growth by 2028, right?
You’d want to cover the effect of inflation at least?
But the mythical 2008 backer of Viewed who chose to invest their winnings in Woolworths got no such thing.
The MarketIndex broker consensus for Woolworths is hold – but now I look at the last 10 years of “performance” from these guys – I’m not so sure anymore.
Woolworths has recently been winning the sales race against Coles from the Wesfarmers Ltd (ASX: WES) stable, but there’s no guarantee that trend will continue – consumers are fickle.
Wesfarmers has recently jettisoned its Coles business with the comments Coles consumed around 60% of its capital spend but delivered just 34% of earnings.
Wesfarmers is focused on looking for some higher growth prospects, and if we take Woolworths as an example, that’s probably a good idea.
And while Coles has been, and likely always will be, a direct threat for Woolworths, things could get even more complex in the grocery space after Morgan Stanley threw its weight behind Metcash Limited (ASX: MTS) to beat Woolies at its own game, at least in the short term.
Let’s not even mention how Aldi and the soon to come Lidl are impacting the overall market.
Morgan Stanley is expecting Metcash to have a bumper December of outperformance, meanwhile, Woolworths is sitting exactly where it was a decade ago, so it seems.
And the proof is in the recent numbers with Woolworths’ recent quarterly update revealing its sales growth in its supermarket division was at a two-year low.
As a potential silver lining, comparable sales at its Big W department stores has jumped 2.2% for the quarter which is a welcome boost for a business that has historically struggled.
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Motley Fool contributor Carin Pickworth has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Wesfarmers Limited. 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 Scott Phillips.