Here’s why the Woolworths (ASX:WOW) share price is down 5% in a week

What’s happening with Woolies shares this week? We take a closer look

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A sad little girl sits in a supermarket trolley, indicating a decline in share market price

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After an initial pop this morning, the S&P/ASX 200 Index (ASX: XJO) is deep in the red so far this Tuesday, currently down 0.34% at 7,345 points. In stark contrast, the Woolworths Group Ltd (ASX: WOW) share price is enjoying some healthy gains today. Woolworths shares are currently up by 1.44% to $38.72 a share at the time of writing.

But zooming out a little, and the picture is far less cheerful. Woolworths shares are now down just over 5% from where they started last Tuesday’s trading session at. That’s a pretty steep fall for just one week. Especially for an ASX 200 blue-chip stalwart like Woolies.

So what’s going on with this grocery giant to cause it to have such a poor week?

We can probably lay most of the blame on Woolworths’ quarterly earnings update that the company released last Wednesday. For the 14 weeks ending 3 October, the company reported a 7.8% increase in sales year on year to $16.07 billion. That included $1.88 billion in e-commerce sales, a 53.5% jump over last year’s figures.

That all sounds positive. But what really seemed to have spooked investors and led to a drop in the Woolworths share price was management’s commentary:

Q1 F22 has arguably been the most challenging COVID quarter for our business, with the Delta variant causing major disruptions to our supply chain and stores, especially in NSW and Victoria…

While the outlook remains uncertain, and there is likely to be challenges in the weeks ahead, we are excited about helping our customers celebrate a much needed festive season in an inspirational, safe and enjoyable way.

After this update was released, the Woolworths share price fell roughly 2.5% and has yet to recover.

Could the Woolworths share price be a buy today?

With this significant pullback in the Woolworths share price, some investors might be wondering if it’s a good time to buy. Well, reception to this trading update was less than well-received by expert investors.

As my Fool colleague James covered last week, broker Credit Suisse wasn’t impressed with what Woolies had to say. It retained an ‘underperform’ rating on the company, with a 12-month share price target of $31.84. Credit Suisse simply thinks the company’s shares are overvalued at their current pricing. It also expects it to face some tightening profit margins.

At the current Woolworth share price, this company has a market capitalisation of $46.15 billion. It also has a price-to-earnings (P/E) ratio of 31.1 and a dividend yield of 2.8%.

Should you invest $1,000 in Woolworths right now?

Before you consider Woolworths, you'll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and Woolworths wasn't one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

*Returns as of January 13th 2022

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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