Woolworths' annual meetings have traditionally been volatile affairs, a once-a-year opportunity for retail shareholders to give voice to issues ranging from the retailer's gambling interests to its treatment of farmers and suppliers.

This year's meeting in Brisbane on Thursday promises to be more heated than usual because of a sharp slump in the share price amid mounting concerns over the sustainability of Woolworths' food and grocery margins and larger than expected losses in home improvement.

Woolworths shares have fallen almost 14 per cent this month to $31.08, taking losses this year to 8 per cent.

Proxy advisers are backing the board over the re-election of chairman Ralph Waters and non-executive directors Jillian Broadbent and Scott Perkins and the adoption of the remuneration report and issue of performance rights under the long-term incentive plan to chief executive Grant O'Brien.

However, the Australian Shareholders Association plans to vote against the remuneration report and the LTIP grant. ASA monitor Allan Goldin said shareholders were disappointed with Woolworths' decision to reduce the performance period for grants under the LTIP from three years to five years, in line with its three-year strategic plan.

"We saw that as being very much a retrograde step," said Mr Goldin.

Investors are also concerned that Woolworths has gradually reduced the earnings per share growth hurdle under the LTIP as profit growth has become harder to achieve.

"It used to be 10 per cent growth three years ago then it was 8 per cent and now it's 6 per cent, so they've had this reducing target, partly because of all the money they are putting into Masters," Mr Goldin.

Woolworths and its US joint venture partner Lowe's have invested almost $3 billion into home improvement over the last five years, but losses from Masters, Home Timber & Hardware and Thriftylink stores are widening, crimping earnings growth for the group.

Figures released last week by Lowe's showed that losses in home improvement rose to around $57 million in the three months ending October, up from a loss of $48.6 million a year ago.

Analysts now believe home improvement losses this year may exceed earlier forecasts around $180 million and last year's $169 million loss – raising further doubt about whether Woolworths will meet its 4 to 7 per cent net profit growth forecasts.

Brokers such as UBS, Commonwealth Bank and Citi have cut profit forecasts in the wake of Woolworths' disappointing first quarter sales figures and Mr O'Brien's admission last month that Woolworths was still struggling to convince shoppers that its prices were as cheap as Coles'.

Analysts believe Woolworths may have to cut prices more deeply and more often to regain share from Coles and Aldi as consumers become increasingly value conscious and discounters gain market share.

Both Woolworths and Wesfarmers have played down the impact of the discounters and the risk of a UK-style price war, citing the strong market share held by independents and the lack of investment in hypermarkets or large out-of-town stores.

However, this month Coles signalled a shift away from hi-lo low pricing to every-day-low pricing, a move interpreted by analysts as a proactive response to the rise of the discounters.

UBS analyst Ben Gilbert, in a report last week, said Australian supermarket margins were 180 basis points above the global average and profits per square metre were 2.3 times higher. "Experience in the UK, US and France suggests the discounters will drive a rebase of Australian incumbent profits," said Mr Gilbert, who cut earnings per share forecasts for Woolworths by 3 to 11 per cent over the next three years.

BT Investment Management fund manager Crispin Murray said Woolworths was "still a very decent performing stock".

"But I do think there are some serious questions about medium term positioning," Mr Murray said.

"The company itself has said there's a perception they're not as good value as Coles – they don't believe that's correct but the customer perception is what matters," he said.

"We're now at a phase where the market is looking at comps [comparable grocery sales] and if they don't improve soon it will add to this concern," he said.

Woolworths had to be given time to implement a new strategy at Masters aimed at boosting foot traffic and sales.

"But it's a really tough place because Bunnings is executing very well."

"The issue for Woolworths is free cash flow generation. Given the capex in supermarkets and Masters ... the dividend may not be covered this year by free cash flow," Mr Murray said.