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Is the Woolworths (ASX:WOW) share price a buy after demerging Endeavour (ASX:EDV)?

Should investors look at the Woolworths Group Ltd (ASX:WOW) after the demerger of Endeavour Group Limited (ASX:EDV)?

The Woolworths Group Ltd (ASX: WOW) share price is in focus after the demerger of Endeavour Group Ltd (ASX: EDV).

Should Woolworths on your watch list? That’s a good question.

The supermarket business is now even more weighted to the groceries side of the operations than it was before.

Woolworths still has a few different segments, including Australian supermarkets, New Zealand supermarkets and Big W.

Now that Woolworths has divested the ‘sin stock’ elements of the business, it might attract a wider range of potential investors.

How are things going right now?

Woolworths might find it difficult to keep growing sales in the coming months because the company is now cycling against the very strong sales of 2020 during the COVID-19 lockdowns.

In the latest update, Woolworths said that its group sales were up 0.4% to $16.6 billion for the third quarter. That included group online sales jumping by 64.2% to $1.34 billion. Australian Food’s Woolies X e-commerce sales went up 90.5% to $878 million with penetration of 7.9% (up from 7.7% in HY21 and 4.1% in HY20).

New Zealand food sales in NZD terms dropped 6.9% to NZ$1.79 billion. Big W sales increased by 18.3% to $10.2 billion.

However, the business continues to work and invest on improving its supply chain.

Woolworths just announced that it was going to construct a new distribution centre in NSW. The design, construction and fitout costs of the new facility are expected to be approximately $400 million, with construction to begin in FY22. Completion is expected in FY24. It is aimed to result in ongoing range expansion and also deliver material transport and operating efficiency benefits from FY25 onwards.

Should investors think about Woolworths at this share price?

At the latest Woolworths share price, it is valued at 22 times the estimated earnings for the 2022 financial year.

For me, whilst Woolworths is a good defensive business with a strong competitive position, I don’t think it’s worth buying at this price.

Slow sales growth is unappealing with interest rates so low and the rate is only going to go higher from here.

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