What’s got the Woolworths Share Price down? (ASX:WOW)

The Woolworths Group Ltd [ASX:WOW] share price has reversed almost all gains from last week as the stock marks its third consecutive loss.

While WOW has moved strongly out of its 52-week low of $32.12 per share, its has begun to concede gains on the back of new COVID-19 fears.

Today, shares are down 0.65% or 25 cents to trade at $38.40 per share.

The ASX 200 has seesawed today as the market contemplates what record debt and deficit will mean once COVID-19 is finally controlled.

Bumper sales but not bumper share price?

The market is nervous now and its shows.

We have been living in the eye of the storm, so to speak.

It has felt like the coronavirus storm blew over us as quickly has it came — at least for everyone besides Victoria.

But we are yet to feel the full force of the economic storm it has created.

However, WOW shareholders might have a little less to worry about.

Supermarket chains increased their market share by almost 6% during the initial phase of the pandemic.

Some are now tipping the bumper sales at supermarkets like WOW and Coles Group Ltd [ASX:COL] could continue for at least another year.

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Supermarket sales rose by $4.48 billion from January to May this year.

With restaurants and cafes still limited or shut completely, supermarkets stand to increase their market share of food expenditure further.

Credit Suisse says the market share gains will boost supermarket sales growth by 1.5% in 2021.

That’s on top of underlying sales growth of about 3.5%.

So, why the recent share price action?

Take a look at the graph below.

ASX WOW - Woolworths Share Price Chart

Source: Tradingview

WOW (blue) and the Consumer Staples Index (red) have tracked in near perfect correlation since March.

Concerns about the Government’s JobSeeker and JobKeeper program, along with rising unemployment may have a role to play in the recent share price action.

Woolworths ready for post-COVID world

There are likely to be profound changes to the ways we go about our daily lives after the pandemic.

The convenience of online grocery shopping has seen WOW invest heavily in new distribution centres.

Just last month the supermarket giant revealed it would develop two new automated distribution centres in NSW.

COL has had to suspend online deliveries to manage demand.

Highlighting the necessity for automation.

WOW also plans to leverage its strong digital presence further.

The company plans to build a $1 billion wholesale business.

WOW is seeking to supply the education, childcare, healthcare, disability and government sectors.

Though its new venture is currently being investigated by the ACCC.

The future could be very bright for companies like WOW, but not all of Australia’s blue chip stocks will survive the storm. In our free report, economist Vern Gowdie reveals the five blue chip stocks he believes you should sell today. Get your copy here.


Kind regards,

Lachlann Tierney

The Rum Rebellion

Lachlann Tierney is a writer for The Rum Rebellion and has been investing for nearly a decade. With a Masters of Science from the London School of Economics, he brings a sound understanding of global markets to his writing. Lachlann is interested in emerging technologies, energy solutions and helping people invest their money wisely. 

The Rum Rebellion