Woolworths Group Provides an Operational Update
Woolworths Group (ASX:WOW) has as of 4 August 2020 provided an operational update vis-à-vis the level four restrictions announced in Victoria this past weekend. Under this new framework, stage four restrictions apply to metropolitan Melbourne, and stage three restrictions apply to regional Victoria. As such, Woolworths confirms the forced temporary closure of its 22 BIG W stores in Melbourne for six weeks. Despite this, the remaining nine BIG W stores operating in regional Victoria will remain open, and all other stores nationally will remain open.
In order to properly facilitate operations throughout this six week period, BIG W stores will run a click and collect, contactless service from the stores within Melbourne. In addition, it will also offer delivery services for all Victorians.
Woolworths’ hotels, 80 total in Victoria, are also affected by the recent restrictions. 50 of the 80 venues initially reopened prior to the reimplementation of lockdown measures, are now closed again, as of 8 July. The company does highlight that all other hotels outside of Victoria continue to operate under the appropriate guidelines and framework.
The Victorian government also announced restrictions for food distribution facilities, as well as abattoirs, prompting fears of national food shortages as panic buying becomes more prevalent. Consequently, these restrictions are revised to facilitate an adequate supply of food and meat, after Woolworths’ CEO Brad Banducci highlighted concerns regarding the efficacy of supply chains. Moreover, Mr Banducci states the current situation is highly challenging and affirms the group’s efforts to ensure that its employees remain safe, as well as assisting other businesses.
Fortunately, as its Woolworths stores are an essential service, they will remain open during this period, with Victorians requiring the group’s offering for food and other staples. With the potential for mass panic buying across the country, Woolworths may see a significant increase in traffic and volume, as individuals stock up on essentials. With supply chains affected as such, the potential for shortages moving is undoubtedly prevalent.
Importantly, Woolworths announced plans to develop an automated regional distribution centre and a semi-automated national distribution centre at Moorebank Logistics Park in Sydney. The facilities anticipated to cost between A$700-780 million over a four-year period. The recent change reflects the strength of the company’s balance sheet during the historic Covid-19 economic environment. Additionally, the group’s adaptability to the changing circumstances reflects positively on the business and its operations.
Given the potential for essential services to continue to do well during this second lockdown period, as they have in the first, Woolworths may also perform well moving forward. In addition to the strength of its balance sheet, reflected in its recent expansion, the group appears well-positioned to navigate this uncertain environment. Woolworths Group expects to report FY20 results on 27 August.