Woolworths shares: To buy or not to buy?

The Woolworths Group Ltd (ASX: WOW) share price has been a rather disappointing ASX 200 share over 2022 thus far. Woolworths shares have spent the year losing value. At the start of 2022, this supermarket giant was going for almost $38.50 a share.

But today, Woolies shares are asking just $34.52 at the time of writing, down a nasty 1.43% for the day thus far. That puts Woolies’ year-to-date losses at a painful 10.35%. That’s well over the broader S&P/ASX 200 Index (ASX: XJO)’s loss of 4.34%.

This might be a bit of a letdown for many investors. After all, Woolworths, as an ASX 200 consumer staples share, is supposed to be an inflation-resistant investment. Not to mention one that holds up well during times of economic uncertainty – a scenario that accurately describes this calendar year.

Woolworths shares: Inflation killer or not?

A possible explanation for this disappointing performance comes from Firetrail Investments’ Blake Henricks. As we covered yesterday, Henricks believes Woolworths’ reputation as an inflation hedge is overcooked. Here’s some of what he said:

It’s very stable, it’s very good, but our view is that supermarkets aren’t going to be huge winners from inflation. To date, that’s been proven to be true because they’ve struggled to pass through some of those costs and we haven’t seen big earnings upgrades.

And the multiples are fairly extended because people are gravitating towards those defensive sectors. So if there’s one I’d call out, it’d be supermarkets as a controversial loser from inflation.

So are Woolworths shares worth buying today in light of this rather poor performance over 2022?

Well, one broker still thinks so. As my Fool colleague James went through earlier this month, ASX broker Goldman Sachs is so bullish on Woolworths shares that it gave the grocer a conviction buy rating. It also slapped a 12-month share price target of $41.70 on the company. That implies a potential upside of almost 21% from today’s pricing.

Goldman acknowledges that Woolies had a soft quarter last month. But it still remains confident that the company has “a clear growth pathway to deliver ~3% sales and ~9% [net profit after tax growth]” until at least FY2025.

So a mixed review for Woolies shares today from these two ASX experts. Only time will tell who ends up being right.

In the meantime, the current Woolworths share price gives this ASX 200 blue chip share a dividend yield of 2.66%.

The post Woolworths shares: To buy or not to buy? appeared first on The Motley Fool Australia.

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Motley Fool contributor Sebastian Bowen 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 has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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