Woolworths Group Ltd (ASX: WOW) is having a battle with Arnotts, will this hurt the share price?
Woolworths was founded in 1924 by Percy Christmas, its first store was opened in Sydney’s Imperial Arcade. Woolworths is Australia’s largest supermarket business, it operates Woolworths supermarkets in Australia and Countdown in New Zealand. It also runs the retail department store Big W. With over 3,000 stores and more than 200,000 employees it’s one of Australia’s largest employers.
Woolworths’ Stoush With Arnotts
According to reporting by the Australian Financial Review, Arnotts is in a dispute with supermarket giant Woolworths.
The cause of the disagreement is about paying more to be part of promotions which aren’t part of the usual shelf ones, such as displays at the end of aisles and the AFL grand final promotion.
Arnotts was recently taken over by private equity outfit KKR, it is the owner of Shapes, Tim Tams, Tiny Teddies, Jatz and Kingstons.
Woolworths took down Shapes and Jatz displays recently and all Arnott’s biscuits have been taken off promotion.
During winter Arnott’s wanted to raise prices so it could get back higher costs due to the drought, expensive power prices and labour costs. Woolworths implemented some of the price increase, but not all of it.
Sources also claimed that Woolworths is not restocking Arnott’s products on the supermarket shelves, resulting in no stock and low stock at some locations, causing Arnott’s staff to do the shelf re-filling rather than arranging displays and checking compliance with promotions.
The AFR seemingly quoted an Arnott’s source, “They wanted us to pay a lot more (for off-location displays), we said no because we’re not getting the price we want for the products.Every store was sent an email to pull all the biscuits down.”
Should Woolworths Shareholders Worry?
It seems as though Woolworths is fighting its corner with this issue, but having low stock on shelves could mean less sales – although shoppers may just decide to buy another brand (including, perhaps, Woolworths private label products), so Woolworths wouldn’t lose out.
Woolworths is a solid business, but it’s currently valued at 26 times the estimated earnings for the 2020 financial year, so it’s not exactly good value.
I’d much rather buy the good shares in the free report below instead for better value and hopefully better growth.
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