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Will Woolworths’ $10 million plan boost the share price?

Woolworths Group Ltd (ASX: WOW) has a $10 million plan to boost its bottom line and the share price.

According to reports in the media, Woolworths is going to spend the money on training and create two new departments called “fresh convenience” and “fresh service” in a bid to steal market share from competitors.

The idea is that Woolworths staff will have better knowledge to be able to inform customers of products, what the best meat cut is and how to cook it.

News Corp media quoted Woolworths supermarkets managing director Claire Peters, “With customers’ ongoing expectations in fresh food, and more shoppers looking for increased convenience, our stores need to deliver the best possible customer experience. For our team members in store, it means more skills, training and opportunities to progress.”

The Woolworths change supposedly won’t lead to job cuts according to the company, however it seems there will be some role changes and some people will be provided “with the opportunity to apply for new roles in the revised structure” according to Ms Peters, but those who aren’t able or willing to be retrained or placed elsewhere will be offered a redundancy.

Customers would always like better quality service and Woolworths is not obliged to hire more people than necessary, but job losses can be negative to a company’s public relations. 

For Woolworths to stand out from cheaper alternatives like Aldi or Costco, the supermarket giant has to offer better levels of services, so I think this idea is a good one. Online shopping certainly doesn’t offer the same level of personalised service as in-store (yet).

Foolish takeaway

Woolworths is currently trading at just under 23x FY20’s estimated earnings. This seems a bit pricey compared to Coles Group Limited (ASX: COL) and the market as a whole for its potential growth over the next five years, which I think is going to be single digit profit growth.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended COLESGROUP DEF SET. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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