- WOW shares have taken a deep dive reaching near their 52-week low price on ASX.
- While the S&P ASX Consumer Discretionary Index has gained over 17% in a year.
- During Omicron when hopes are high on Consumer stocks, WOW shares have not turned up.
ASX listed popular supermarket business, Woolworths Group Limited’s (ASX:WOW) shares have fallen close to their 52-week low prices on ASX today. Though WOW shares were in green today, they have highly underperformed the S&P/ASX 200 Consumer Discretionary Index in a year’s time. While the Index has gained over 17% in the ongoing pandemic, WOW shares have only moved a 2.69%.
How was the last 1 year for WOW shares?
Woolies shares had reached a price of AU$41.99 each in August when the supermarket had announced a major share buy-back on ASX. However, the gains could not be sustained, and WOW shares have fallen back to where they were one year back.
Dips in the share price were seen in September and October end when Woolies had declared a Bond issuance and near its AGM date. However, a major movement in shares in the near term were because of its proposal to acquire Australian Pharmaceuticals Limited (ASX:API). Moreover, the shares have dived deeper on withdrawal of the acquisition proposal.
Why is WOW not acquiring API anymore?
On 2 December 2021, WOW shared a non-binding proposal to acquire 100% of shares in API. However, after completion of a complete due diligence process, WOW has withdrawn. It was unable to validate the financial returns according to its requirements from the acquisition.
Did Covid affect WOW financially?
As revealed in its H1-22 trading update, Woolies was facing its most challenging period due to the Delta strain affecting stock flows. Covid-19 had impacted its earnings expectations, with significantly higher costs and supply chain inefficiencies. While the digital sales profitability improved, WOW’s store originated sales declined, impacting overall profitability in H1-22.
While it Woolworths group is yet to declare its H1-22 results, the problem caused by the global supply chain glut still remains. Moreover, with Omicron cases rising in Australia has kicked in a shortage of staff and truck drivers to move stock.
WOW’s road ahead-
The surging Omicron and Covid related restrictions might aggravate the problems faced by Woolies. While the demand for consumer goods hasn’t slumped the supply side issues are worrying retailers. Moreover how Woolworth’s manages capital and handles the cropping pandemic related issues will determine its future trail.
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