Woolworths Group Ltd (ASX: WOW) shares are marching higher in afternoon trade on Tuesday.
Shares in the S&P/ASX 200 Index (ASX: XJO) supermarket giant closed yesterday at $33.00. At the time of writing, they are changing hands for $33.09, up 0.3%.
For some context, the ASX 200 is up 0.9% at this same time, putting it at new record high intraday levels.
As you can see on the chart above, Woolworths shares have underperformed over the past 12 months, down 11.7%. Though that doesn't include the $1.44 a share in fully franked dividends the ASX 200 company has paid out over the year.
The company has faced headwinds on several fronts.
Those include lower FY 2024 profits, the possibility that the government could force Coles Group Ltd (ASX: COL) and Woolworths to split off some of their businesses in a bid to increase competition, and, most recently, legal actions alleging misleading sales price claims.
But according to Seneca Financial Solutions' Arthur Garipoli (courtesy of The Bull), that's water under the bridge now, and he recommends Woolworths shares as a long-term buying opportunity.
Why this fund manager is backing Woolworths shares
Commenting on the legal proceedings that have impacted Woolworths shares, Garipoli said, "The Australian Competition and Consumer Commission (ACCC) announced in September 2024 that it had started separate proceedings in the Federal Court against supermarket giants Woolworths and Coles."
He continued:
The ACCC claims Woolworths and Coles had allegedly breached Australian Consumer Law by misleading consumers through discount pricing claims on hundreds of common supermarket products.
Woolworths announced on September 23, 2024, that it would carefully review the claims made by the ACCC and continue to engage with the ACCC. Coles announced on September 23, 2024, that it intends to defend the proceedings.
A final ACCC report will be released by February 28, 2025.
Garipoli concluded that markets have now priced in these issues to Woolworths shares.
"It appears earnings and valuation risks are now priced in to WOW. In our view, this stock suits the longer-term investor," he said.
What did Woolies report for FY 2024?
Woolworths reported its full-year results on 28 August.
With inflation impacting customer shopping habits and simultaneously increasing the costs of doing business, Woolworths' costs were up in FY 2024, and the company's normalised profit after tax before significant items was down 3% to $1.71 billion.
On the plus side, normalised sales were up 3.7% from FY 2023 to $67.92 billion.
And the ASX 200 supermarket rewarded shareholders with a supersized 97 cents a share final dividend.
Woolworths shares closed up 3.3% on the day.
