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Industrial action has cost Woolworths Group (ASX: WOW) $50 million in lost sales over the past two weeks with no end in sight for the strike ahead of the busy Christmas period.
The supermarket giant, which is in dispute with the United Workers Union (UWU) over enterprise agreements at distribution centres in Victoria and NSW, has been hit by stock shortages in stores after the union sought a pay increase of 25 per cent over three years.
Woolworths says it has engaged "in good faith" with the union over the past four months, adding today that the negotiations remain unresolved.
Workers at three distribution centres in Victoria and one in NSW have been on strike since 21 November and over this period Woolworths says its Australian Food division’s sales have so far taken a $50 million hit.
“Until the industrial action is resolved, a further impact to sales is expected,” says the company.
“The full financial impact at this stage is unknown. It will be dependent on the duration and extent of the ongoing industrial action across the affected sites, and the time taken to rebuild inventory ahead of the Christmas trading period.”
The one-off impact has not been factored into the company’s Australian Food earnings forecasts which in October stood at EBIT of between $1.48 billion and $1.53 billion million for the six months to the end of December. The target range is already down from the $1.595 billion recorded in the first half of FY24.
Woolworths says it is committed to resolving the action “as soon as possible” and is implementing measures to minimise the impact on customers and staff. This includes building inventory at stores, leveraging its broader distribution network and getting some suppliers to deliver directly to stores.
The extended nature of the dispute is hitting some of the group's supermarkets in Victoria, ACT and NSW with the dispute hitting the availability of "ambient, chilled and freezer lines for customers".
“We sincerely apologise to all of our customers for the inconvenience caused by the inconsistency of supply across some product lines in some of our stores in Victoria, southern NSW and ACT,” says Woolworths CEO Amanda Bardwell.
“We are working hard to try and improve the situation and would like to thank our customers for their understanding and for treating our teams with respect.”
Woolworths is pushing back on the union demands for a pay increase, arguing that it is “materially above inflation” amid ongoing public pressure on the group to keep food and groceries affordable.
The company says the UWU is also demanding there be “no enforceable performance standard or rate” which hampers the group's ability to manage productivity that is typically allowed across the supply chain sector.
“While each site is negotiating its own separate enterprise agreement, Woolworths Group has put forward several offers with competitive pay that is above local market rates, and well above the Storage Services Award,” says the company.
“The latest offers would take hourly rates at these sites to approximately 40 per cent above the award. The Shop, Distributive and Allied Employees' Association (SDA) also represents a number of the team members at the affected sites.”
Woolworths says that despite the SDA endorsing an offer to resolve the enterprise agreement negotiations at its Melbourne South Regional Distribution centre, the company has been prevented from reopening the site due to UWU picketing.
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