If supermarkets are ‘COVID winners’, why is the Woolworths (ASX:WOW) share price sliding into 2022?

The Woolworths Group Ltd (ASX: WOW) share price is struggling this week amid a broader market sell-off.

In the two years since the first outbreak of COVID-19 in 2020, the supermarket giant has profited as consumers took to “pantry-loading” along the way. So, why is the current Omicron outbreak sending the company’s share price sideways?

At the time of writing, the Woolworths share price is trading at $37.62. That’s 0.5% higher than its previous close but 1.9% lower than it was at the end of 2021 and 7% lower than its price 30 days ago.

For context, the S&P/ASX 200 Index (ASX: XJO) has slid 0.2% since the end of 2021 and has gained 1.8% over the last 30 days.

Let’s take a closer look at how Woolworths shares have reacted to recent COVID-19 outbreaks.

How does the Woolworths share price perform during outbreaks?

The Woolworths share price was boosted in 2020 after the company stated that, while the pandemic initially brought many hurdles for the supermarket, it had generally resulted in increased sales. The company said:

In [the second half of financial year 2020], total sales growth of 10.4% on a normalised basis was driven by COVID pantry-loading and higher in-home consumption through lockdown and community movement restrictions.

That was reflected once more in Woolworths’ results for financial year 2021. However, the party now seems to have ended.

Along with the rest of Australia, Woolworths began its journey with Omicron around the same time it announced the Delta strain’s negative impact, which sent it share price plummeting 7%.

Lockdowns brought about by outbreaks of the Delta strain saw the supermarket’s customers returning to more ‘normal’ shopping patterns. However, COVID-19 related costs still hit the company in the first half of financial year 2022.

Challenges ahead

And now, the current outbreak has brought around both new and old COVID challenges.

The supermarket issued a plea to customers earlier this week. It asked for patience as supply chain issues hit New South Wales and Queensland.

One such issue is absenteeism at distribution centres. Many staff members at some of the company’s warehouses have either contracted the virus or been forced to isolate at home.

According to reporting by The Australian, other food distributers are calling to remove close contact rules. They believe such rules are currently stifling the industry.

The Woolworths share price isn’t the only supermarket struggling through the first week of 2022. That of Coles Group Ltd (ASX: COL) has also slipped 2%.

Additionally, Woolworths retracted its takeover bid for Australian Pharmaceutical Industries Ltd (ASX: API) this morning. That news will likely impact its share price today as well.

The post If supermarkets are ‘COVID winners’, why is the Woolworths (ASX:WOW) share price sliding into 2022? appeared first on The Motley Fool Australia.

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Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns and has recommended COLESGROUP DEF SET. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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