Simon Shields, Principal at Monash Investors, expects things to get worse at Woolworths rather than better. Despite the well-known issues in the business, the market consistently underestimates significant change, especially in the case of Woolworths. While margins might look bad at 4-5%, this is still double what it was when Roger Corbett took over - Woolworths has had margins of 1-2% in the past. “The opposite of the virtuous circle, in the case of retailers, is the doom loop.” As sales per square foot fall and fixed costs are spread less spread out, and logistics become less efficient. “I think it’s pretty diabolical right now for Woolworths, and I don’t see any evidence that we’re at an end.” Watch the video below for the reasoning behind his short position in the stock:
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