The Woolworths Limited (ASX: WOW) share price has been one of the worst-performing blue chip stocks in the ASX's top 20 throughout 2015.
In fact, Woolworths' share price has fallen 22.6% since the beginning of the year. Meanwhile, the S&P/ASX 20 (Index: ^AXTL) (ASX: XTL) is 10% lower.
The supermarket giant's share price fall has been put down to its managerial complacency over recent years, with a resurging Coles – owned by Wesfarmers Ltd (ASX: WES) – and Aldi chipping away at Woolworths' dominate market share within the supermarkets business.
Indeed, Woolworths' supermarkets held profit margins above 6.5% when others (like Coles) were scrambling to get their profit margins above 4%. With price and convenience front of mind, a perception of lower prices has taken consumers' wallets to other stores. Ultimately, Woolworths' shareholders are scared that the company's recent fall may be an emulation of Tesco, the embattled UK supermarket giant.
Further, Woolworths appears to have got its hardware offering wrong, with many analysts critical of the company's move into the $46 billion home improvement market. Masters is still unprofitable and appears largely in a trial-and-error stage of its lifecycle. However, in my opinion, it won't take much more time or capital to augment the Masters or Home Timber and Hardware strategy towards solid sustainable long-term returns.
The market also doesn't like uncertainty. And the impending departure of Woolworths' CEO, Grant O'Brien and many at the boardroom level, has left the market suspecting the company lacks strategic conviction.
On the other hand, there is a lot to like about Woolworths, including its incumbency as Australia's top supermarket operator and a diversified revenue stream, provided by its Big W, Dan Murphy's, Hotels, and home improvement businesses.
Buy, Hold or Sell?
No investor knows where the Woolworths share price will head in the short-term. However, after such a heavy decline it's clear the market is pricing Woolworths shares for a bleak future. Of the 16 analysts surveyed by The Wall Street Journal, 8 have a 'sell' rating on Woolworths stock, despite the average price target being $24.90.
In my opinion, we've likely seen the worst from the Woolworths share price, but I wouldn't buy at today's prices. I'm waiting for more clarity at the senior management level and a more compelling valuation before considering adding to my position.
