The Woolworths Group Ltd (ASX: WOW) share price has taken a beating over the past 6 months, dropping from around $35 to its current value of $28.30.
So, with Woolworths' share price down about 20% over the past 6 months, does this represent a buying opportunity?
Goldman Sachs thinks so.
The broker put a $36.10 price target on Woolworths shares, implying gains of about 25% over the next 12 months.
Goldman Sachs believes Woolworths is showing signs of improving productivity and sees value in the foods and everyday needs retail business, with the company currently trading around 22x earnings.
Goldman's positive outlook follows last month's release of Woolworths half-year results.
Sales for the period were up 3.7% to $35.9 billion, largely in line with Goldman's expectations.
On the negative, Group EBIT was down 14.2% for the half to around $1.45 billion, which Woolworths attributed to its Australian food segment suffering 17 days of industrial action and costs associated with improving its supply chain, among other factors.
Woolworths stated that industrial action had cost the company about $95 million, and supply chain commissioning and dual-running costs took a $ 41 million chunk out of its EBIT.
More recently, it seems things are looking up for Woolworths
Woolworths reported that its food retail business saw total sales grow by 3.3% in the first 7 weeks of H2 FY25.
The company expects cost-of-living pressures to continue in the second half, driving consumers' value-seeking behaviours. Woolworths believes it can capitalise on this through initiatives such as clearer promotions and a greater emphasis on pushing its own brands, which the company says can offer consumers better value.
Woolworths will certainly need to address customer churn resulting from cost-of-living pressures, which motivate consumers to look for cheaper options.
And consumers aren't the only ones adopting value-seeking behaviours.
Woolworths stated it will review its organisational structure and simplify its above-store Support Office to seek cost savings of around $400 million by the end of the 2025 calendar year.
The company also hopes to soon realise the benefits of its new $700-million National Distribution Centre in Western Sydney, which is set to open later this year.
New CEO Amanda Bardwell said: "Our multi-year supply chain transformation is the Group's single biggest capital investment to date, and ensuring a smooth transition and realisation of benefits is a priority."
Should you invest in Woolworths?
Personally, I'm still not convinced. As the company is well aware, it faces significant economic headwinds in 2025.
However, early signs of sales growth in H2 FY25 are positive. If that trend continues and the company successfully implements its cost savings initiatives, including realising value in its supply chain overhaul, I will be more confident in Woolworths' prospects.
