Woolworths supermarkets

Woolworths Resolves Supply Chain Strikes, But Challenges Remain

Australia’s largest retailer is expecting a $50 million to $60 million profit hit.

TLDR: Woolworths Group has resolved industrial action at four key Distribution Centres, with new agreements ensuring wage increases and addressing worker concerns. However, the strikes have caused significant financial impacts and disrupted supply chains, with ongoing recovery efforts expected to affect the busy Christmas period.

Overview: End of Industrial Action

Woolworths Group (ASX:WOW) has reached a resolution after weeks of industrial action at four of its major Distribution Centres (DCs) in Victoria and New South Wales. The new enterprise agreements, endorsed by the United Workers Union on December 7, bring wage increases totaling approximately 11% over three years. These agreements also address worker concerns about performance metrics while maintaining operational efficiency and safety standards.

This comes after a prolonged 17-day strike that disrupted store service levels and left shelves noticeably bare across Victoria, ACT, and parts of NSW.

The Financial Toll

The strike has had a significant financial impact on Woolworths’ Australian Food division:

  • Sales Impact: An estimated $140 million in lost sales by December 8, with $90 million of this occurring since December 3.
  • Earnings Impact: A one-off hit to Australian Food EBIT of $50–60 million, reflecting lost sales, higher transport costs, and stock losses.

These figures were not factored into Woolworths’ initial forecast for the first half of FY25, and the full financial fallout remains unclear.

What’s Next for Woolworths?

With just over two weeks until Christmas, the focus has shifted to recovery. Woolworths CEO Amanda Bardwell has assured customers that efforts are underway to restore stock levels at DCs and stores. However, rebuilding supply chains ahead of the busy holiday season presents a logistical challenge, meaning stock availability will improve only gradually.

Analysis: Implications for Investors

For investors, this resolution offers some relief, as further industrial disruptions appear unlikely in the near term. However, the financial impact is noteworthy, especially as Woolworths works to recover during a critical trading period. The company’s half-year results in February will be crucial to understanding the full extent of the damage and its longer-term implications.

Extra Insight: Why DCs Are Crucial

Distribution Centres are the backbone of Woolworths’ supply chain, ensuring timely delivery of goods to stores nationwide. Disruptions at these hubs can ripple across the entire network, as seen during the recent strikes. With consumer expectations heightened during the holiday season, the stakes for operational recovery couldn’t be higher.

Conclusion

While Woolworths has successfully resolved the industrial action, the aftermath continues to challenge the company. Investors and customers alike will be watching closely as Woolworths races to stabilize its supply chain and deliver a smooth Christmas shopping experience.