Woolworths Proposes to Acquire PFD Food Services
- The Group releases its 2021 First Quarter results.
- Most of the divisions report positive earnings.
- The ACCC voice their concerns regarding the proposed PFD acquisition.
Woolworths Group (ASX:WOW) demonstrate good first quarter results with strong trading momentum for the 14 week period to 4 October 2020, despite the closure of many BIG W stores and ALH venues. The Group now is placing a heavy focus on ensuring they implement a ‘COVIDSafe Christmas’. Group sales increased by 12.3 per cent to $17.8 billion, in comparison to Q1’20, and Group eCommerce sales by 86.7 per cent to $1.5 billion.
Australian Food total sales increased by 12.9 per cent as the Company introduced successful marketing campaigns such as the Disney+ Ooshies program. New Zealand Food sales grew by a more modest amount of 6.9 per cent due to easing COVID restrictions and lower market growth rates. Despite the closure of multiple stores across Victoria, Big W’s total sales increased by 20.4 per cent and Endeavour Group, Endeavour Drinks’ sales boasted similar figures of a 21.4 per cent increase in sales. This was in large anchored by Dan Murphy’s and eCommerce performance. Amidst widespread Group positivity, Hotel trading, as expected, was heavily impacted by the coronavirus and its subsequent implemented restrictions, with total sales declining by 33.2 per cent.
Woolworths has actively sought to support their communities and team during the quarter, through being involved in initiatives such as food appeals in both Australia and New Zealand and assisting residents during the Melbourne towers lockdown. The Group expects elevated sales and costs to continue for the rest of the calendar year, whilst continuing to embrace eCommerce and ensure stores remain COVIDSafe.
The Australian Competition and Consumer Commission (ACCC) has voiced its concerns regarding Woolworth’s proposal to acquire 65 per cent of PFD Food Services. PFD is a wholesale food distributor, who purchase a diverse range of food products from manufacturers and distribute them to various businesses such as restaurants, clubs, cafes, hotels, and fast-food franchises. The ACCC has alluded that the proposed acquisition may further increase Woolworths’ bargaining power in the food sector, thus increasing their size as a customer of food manufacturers and suppliers.
According to ACCC Chair Rod Sims, “If Woolworths was able to use its existing bargaining power as a retail buyer to gain better supply prices for PFD then PFD could obtain on its own, in the medium term this could have serious consequences for the structure of the wholesale food distribution sector, such as reduced range, choice, and service levels.” Furthermore, the ACCC is considering other issues, including whether Woolworths acquiring a company which supplies its competitors will lead to risks of foreclosure.