FX.co ★ Woolworths Reopens Distribution Centres Amid Strike Settlement, Sees A$140 Mln Impact On Food Sales

Woolworths Group Limited (WOW.AX) announced the reopening of its four distribution centers following an agreement with previously striking workers. Nevertheless, the company projects a negative impact on food sales amounting to approximately A$140 million as a consequence of the strike.

The newly endorsed agreements come after a 17-day strike that significantly affected service levels across various Woolworths Supermarkets in Victoria, the ACT, and parts of NSW. The United Workers Union backed the enterprise agreements on December 7th, while the SDA had already endorsed the Melbourne South Regional DC (MSRDC). These agreements promise employees wage increases totaling around 11% over three years, which strike a balance between providing competitive pay rates and ensuring business sustainability. The specific increases will vary depending on the site and year.

Australian Food sales have been adversely impacted, with a total negative effect of approximately A$140 million recorded until December 8th. The direct one-off negative effect on Australian Food's EBIT is estimated to range from A$50 million to A$60 million, accounting for lost sales, additional transport, supply chain contingency costs, and higher levels of stock loss.

Although all sites have resumed operations, Woolworths Group expects further sales and earnings challenges for Australian Food in the second quarter. This is due to the ongoing efforts needed to restore stock levels at distribution centers and stores ahead of the busy Christmas trading period.