Supermarket giant Woolworths has announced nearly $100 million in costs and impairments for the June 30 financial year due to a fresh round of warehouse worker redundancies, Covid-related poor trading at its inner-city Metro stores and costs of the Endeavour drinks spin off and purchase of 65% of PFD.
The big news though was buried under the headline news of a $44 million cost for staff retrenchments – which in reality represents the cost of getting rid of around 330 jobs in the closure of one fresh food site in Sydney’s west and its replacement with a standalone operation in the city’s South West.
Woolies is retailer closing its huge Minchinbury distribution centre in western Sydney in 2024 as the site has hit capacity. As part of the plans to replace it a replacement centre will be built at Moorebank in the southwest of Sydney for non-fresh and frozen goods.
They will be handled in a new 76,000 square metre centre to be built Wetherill Park. Both will service the company’s 280 store NSW network, as well as other parts of its national supermarket chain.
Woolies said that the 330 or so jobs lost at Minchinbury will be offset by the 700 new jobs set to be created through the construction of its new $400 million fresh food and temperature-controlled warehouse in Wetherill Park.
CEO, Brad Banducci said in a statement yesterday that it would complete the company’s transformation of its NSW supply chain network, though he acknowledged the impact the Minchinbury site closure would have on staff.
“We understand the impact these decisions have on our team members and we are committed to supporting those impacted. We will explore redeployment opportunities wherever possible, and provide a wide range of support and career transition services in the lead up to site closure,” he said.
A year ago, Woolies announced the closure of three of the company’s distribution centres (Yennora and and parts of Minchinbury in Sydney) plus Mulgrave in Melbourne. The fresh and temperature-controlled warehouse at Minchinbury was to stay open (although with two third party sites nearby) but that decision has now been changed.
Woolworths also revealed it would take a $50 million impairment on its small-format Metro stores due to the impact of COVID-19, which has seriously reduced sales as shoppers have eschewed offices for home working.
Overall the retrenchment costs and other one offs would create a $57 million gain for June 30.
This would include a gain on equity interest in data company, Quantium of $220 million, $69 million in transaction costs for the Endeavour spin-off and purchase of 65% of PFD, the supply chain redundancy (employee sackings) of $44 million and the Metro write down.
The Quantium profit is a book keeping transaction “Following the acquisition of an additional 27.8% equity interest in Quantium on 31 May, the Group will recognise a non-cash gain of approximately $220 million reflecting the fair value of the Group’s original 47.2% interest compared to its previous carrying value, less transaction costs.
“The gain arises due to the accounting requirement to treat the original equity interest as if it was disposed of and reacquired at fair value as at 31 May 2021,” Woolies explained.
The Metro chain write down reflects changes in CBD occupancy and public transport useage because of Covid.
Woolies said it had completed a review of its Metro Food Stores network, given the impact of COVID on sales in key transit traffic locations such as CBD and public transit sites.
“Sales in these locations have been, and remain, materially negatively impacted by COVID. While the Group remains committed to the rollout of Metro Food Stores, it will record a non-cash impairment charge of approximately $50 million in relation to store and lease assets across 13 stores within the network.
“This impairment charge reflects a balanced view on the speed of recovery of CBD and transit customer movements and the likely impact of this on Metro stores.
Mr Banducci in Wednesday’s statement that the retailer remains “very committed to our convenient Metro Food Stores having refined our smaller format and range over a number of years.”
“However, the changing customer work and shopping patterns we have seen over the last 15 months have negatively impacted some of our stores, particularly in CBD and transit locations, resulting in the impairment announced today.
“Most Metro stores are in locations that have not been impacted by a reduction in customer foot traffic and continue to perform well, including new-look neighbourhood stores recently opened in suburban Sydney,” he said.
Woolies shares fell 1.9% to $42.51.
