Woolworths restructures ahead of a challenging year
Woolworths has today announced a restructure that will see a significant shift in the way its supermarkets operate.
A new presence on the shop floor
The company’s headquarters will be greatly downsized, with jobs heading out to the stores in order to provide greater local expertise. Performance indicators will also be amended, with sales-per-square-metre reintroduced as a key metric, and return-on-funds-employed being tracked to measure company efficiency.
The change comes off the back of a new national campaign designed to humanise the retails giant. So-called ‘ordinary’ Australians describe reasons why ‘they choose Woolies’ in an informal and relaxed manner – particularly by avoiding the more formal ‘Woolworths’ shop-name throughout.
Market watchers will be intrigued to see the response to this move. Woolworths Australia (WOW) closed at 22.45 – a long way down from the 5Y highs of 37.13 back in May 2014.
Gambling on pokie revenue
However, one of the underlying threats to Woolworth’s bottom line might be poker machine reform as part of the newly-elected parliament.
The new senate looks even more cumbersome than the last, and it’s the ascension of Nick Xenophon Team (NXT) that may for some changes around the rivers of gold that gambling has provided for both government and private enterprise.
As the big online gambling companies continue to merge and create even greater global behemoths, the first target in NXT’s sights will be poker machines.
This is particularly of concern for Woolworths. Their entertainment arm – Australian Leisure & Hospitality Group – owns almost 330 pubs across Australia. Most of the venues have multiple poker machines and deliver around $350 million net revenue each year.
A push by NXT to limit poker machine bets to $1.00 per spin, as well as lowering the hourly play limit to $120.00, would have a significant impact upon that income. Problem gamblers contribute 40% of the $11 billion lost to poker machines each year, so it’s not difficult to assume that given ALH’s position in lower socio-economic markets there is a definite risk to the bottom line.