2023/4 has been a disappointing time for Australia’s largest grocery chain, WOW, which is down over 16% so far this year, underperforming its peers and the overall market. Woolworths historically trades as a higher multiple to the others., predicated on its stronger operational execution, particularly through its supply chain, while it’s invested more heavily in its business than Coles, which suffered under Wesfarmers ownership.
This month’s 3Q sales update from the supermarket giant was on the softer side, sending the stock down to a 4-year low. The market is looking for signs WOW can turn its ship around operationally, but for now, we believe patience will remain a virtue. Woolies still trades on 21x earnings, around 9% ‘cheap’ compared to its 5-year average, and it is expected to yield 3.7% fully franked.
- We believe the risk/reward will start to look interesting below $30, but February’25 is a cloud looming on the horizon.
MM is neutral WOW
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