Is the Woolworths Group Ltd (ASX: WOW) share price a buy considering it has risen by 5.5% over the past month?
It's not very common for the share price of a defensive share like Woolworths to rise so much in one month.
In-fact it's been a pretty good few months for Woolworths, in November it announced it was finally selling its petrol division, including the 540 Woolworths-owned fuel convenience sites, to EG Group for $1.725 billion.
As part of the deal, a 15-year alliance was entered into to include: Woolworths' four cent per litre fuel discount, Woolworths customers can still earn Woolworths Rewards points on fuel and merchandise and Woolworths will provide wholesale food.
The capital raised by the sale transaction could be used in a number of different ways, with Woolworths considering initiatives like a share buy-back and a special dividend. This would be a good way to reward shareholders in the short-term.
Although Woolworths had a tough first quarter in FY19 it still reported growth, total first quarter sales from continuing operations grew by 1.9%, with the key Australian food segment also growing by 1.9% and Endeavour Drinks, which includes Dan Murphy's, reported sales growth of 3%.
There was more to the Woolworths Food update than the headline figure – the total change in average prices excluding tobacco showed a 2.5% drop, but on the customer side of things the comparable transaction growth was 2.1%.
Food price deflation seems to be the way of things at the moment, but there's only so much Woolworths can cut prices in the hope of boosting volumes before it starts cutting into the profit margin.
I was pleased to see that Big W was able to reveal total sales growth of 1.3%. In a sign of what could be key for future growth, Big W reported online sales of 177% in the quarter due to the popularity of 'Pick Up'. Big W will have to fight hard to do well against Amazon.
Foolish takeaway
Woolworths is currently trading at 23x FY19's estimated earnings with a grossed-up dividend yield of 4.9%. Whilst Woolworths is defensive I wouldn't want to buy it at this price to try to beat the market. Coles Group Limited (ASX: COL) could turn out to be the better investment out of the two.
