One of South Africa’s favourite retailers Woolworths (JSE: WHL) known as Woolies to the locals has recently been making bad business decisions, after noticing the shrinking economy of South Africa they decided to expand their business into the Australian market.
Woolies after expanding and obtaining the business David Jones in 2015 started to see a steady decline in their share price, this resulted in them having to cut down jobs and also writing down the value of their David Jones business.
Analyst Ryk de Klerk says that Woolies has since November 2015 some R60bn or more than 55% of the company’s market capitalisation has been destroyed and highlighted that this was due to many reasons such as consumer behaviour change, the shrinking economy, the growing online market and poor business decisions.
Ryk de klerk also analysed the Woolies shares and noticed that in 2015 “Woolies’ share price was trading at a premium of 35% to the market as measured by the trailing price-to-earnings ratio relative to the FTSE/JSE Industrial Index. Six months later it was trading at a discount of more than 25%. Yes, a massive underperformance of 45% against the market. Yes, from exceptional to ordinary“