Woolworths Group Ltd (ASX: WOW) shares have been strong performers in 2023.
Shares in the S&P/ASX 200 Index (ASX: XJO) retail giant are up 0.7% in intraday trading today. That puts the stock up 17.5% since the opening bell rang on 3 January.
For some context, the ASX 200, up 0.3% today, has gained 7% year to date.
Atop the strong recent run of gains, Woolworths shares are also sought after for their reliable passive income.
Over the past 12 months Woolworths has paid out 99 cents per share in fully franked dividends.
At the current $38.88 per share, that equates to a trailing yield of 2.5%, with potential tax benefits.
But could the stock come under pressure amid intense competition with its peers?
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Why could Woolworths shares be facing headwinds?
Stuart Bromley, private wealth advisor at Medallion Financial Group, notes (courtesy of The Bull), "The supermarket giant's own brand sales have been increasing as shoppers look to save on groceries."
Indeed, at its quarterly report for the three months ending 2 April, Woolies reported $16.3 billion in group sales, up 8% year on year. Sales increased across its segments, with Big W's sales up 5.7% from the prior corresponding quarter to $1 billion.
However, Bromley has a sell recommendation on Woolworths shares, with concerns over the company's ability to grow sales further.
"Moving forward, growing group sales and expanding margins will be a challenge in a fiercely competitive market," he said.
Then there's the potential that increasingly strapped Aussie consumers will spend less in the months ahead.
"Also, higher interest rates and soaring cost of living expenses reduces discretionary spending. Investors may want to consider cashing in some share price gains," Bromley said.
Commenting on that outlook following Woolies' quarterly result release in May, Woolworths CEO Brad Banducci said, "In general, customer spending is stable. However, value-conscious customers are becoming more thoughtful about their discretionary spend…"
Woolworths shares are sure to be back in the spotlight when the company releases its full-year earnings results on 23 August.
