Woolworths Group Ltd’s (ASX: WOW) share price and profit could be hurt because of staff changes.
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’ Painful Staff Changes
A while ago Woolworths announced that it would be making staff changes and making new ‘fresh’ departments called ‘fresh service’ and ‘fresh convenience’. Fresh service will cover seafood, butchery and delicatessen whilst fresh convenience will be on top of dairy eggs, pre-packaged meat, branded bread and convenience food.
At the time the supermarket said there would be no net reduction of staff from the changes, but there would be role changes, a shift to elsewhere in the company or redundancies.
Today the Australian Financial Review reported that these changes have “smashed” staff morale according to Retail and Fast Food Workers Union secretary Josh Cullinan. A supplier also said that the loss of experienced managers is causing disruption.
Mr Cullinan said, “The fallout is those who are staying on in lower-paying jobs and the wholesale changes to rosters across the network. It’s smashed morale and destroyed their relationship with very long-term staff. We expect it will have a lasting and very significant impact on the staff experience and therefore the customer experience.
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Some staff have seen wage cuts of around 10% and the AFR named an example of a woman who had worked at the supermarket for two decades but her $65,000 salary was going to be cut by $20,000.
Thousands of staff are now working for less whilst around 1,000 have left Woolworths.
A customer’s experience in Woolworths is particularly affected by the products and the staff, so demoralising the staff doesn’t seem like a great move for a relatively small profit gain if it leads to customers changing to other supermarkets like Aldi or Coles Group Limited (ASX: COL).
A share price of just over $36 means Woolworths is valued at 25 times the estimated earnings for the 2020 financial year according to CommSec. I don’t believe this in an attractive valuation for a business that’s going to be growing quite slowly into the future.
For reliable earnings and dividends, I’ve got my eyes on the shares in the free report below.
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