Woolworths Group has announced a new $400 million distribution centre at Wetherill Park in western Sydney as it flags several significant pre-tax items that will impact its full-year results.
The group’s FY21 results will be announced on 26 August. It expects a $220 million gain on its equity interest in Quantium, with transaction costs ($69 million), supply chain redundancies ($44 million) and Metro Food stores asset impairment ($50 million) resulting in the pre-tax significant items amount of $57 million.
The Group said its Endeavour Group demerger and PFD Food Services acquisition costs will be around $69 million, with the demerger costs expected to be in line with previous guidance of $45-$50 million.
New DC to replace existing fragmented network
The Wetherill Park Fresh Distribution Centre (DC) will replace the existing fragmented network and supply more than 280 stores in New South Wales. Construction of the multi-storey facility will start in FY22 with completion expected in FY24.
The DC would provide ongoing employment to around 700 team members and 500 during construction, the company said.
Woolworths Group CEO Brad Banducci said the Wetherill Park Fresh DC will, “substantially complete the transformation of our New South Wales supply chain network as we consolidate our current fragmented temperature-controlled network.”
Currently three DCs make up the group’s fresh and temperature-controlled network - its Michinbury Fresh DC and two third party facilities.
In June 2020, Woolworths announced the closure of its Yennora, Mulgrave and ambient operations at the Michinbury DC, with those operations moving to its $700-780 million automated Regional DC and semi-automated National DC at Moorebank Logistics Park in Sydney. The semi-automated National DC covers 40,700 square metres and is expected to receive and dispatch roughly 9000 products from more than 900 suppliers to more than 1020 stores.
At the time the company said fresh and chilled operations would remain at Michinbury.
Banducci said the group was committed to supporting affected staff and would explore redeployment opportunities wherever possible.
Meanwhile, a development application would be lodged this week for a new 35,000 Kemps Creek liquor DC to service Endeavour Group NSW stores (Dan Murphy’s and BWS) under a partnership agreement from 2022. This would create 180 ongoing jobs and 100 during construction. The existing liquor DC at Erskine Park will be converted into an ambient grocery DC when Kemps Creek opens.
Primary Connect managing director Paul Graham said the agreement with Endeavour Group recognised the scale and capability Primary Connect could offer external partners.
Metro Food stores asset impairment
Woolworths said Metro Food stores in key transit traffic locations including the CBD and public transit sites have been severely impacted by COVID-19. It will record a non-cash impairment charge of approximately $50 million in relation to 13 stores.
Three of the 13 stores are already closed. “We’re reviewing our options across the remaining 10 sites. We have different lease durations across each site, so there are no plans for any immediate Metro store closures from today’s announcement,” the company said.
Banducci said, “The changing customer work and shopping patterns we have seen over the last fifteen months have negatively impacted some of our stores. Most stores are in locations that have not been impacted by a reduction in customer foot traffic and continue to perform well, including new-look neighbourhood stores recently opened in suburban Sydney.”
The company said it still plans to open around 30 new Metro stores over the next three years, with a bias towards our neighbourhood food stores, which are performing well.
