The Woolworths Group Ltd (ASX: WOW) share price is edging higher on Tuesday.
In morning trade, the retail giant's shares are up $30.50.
Why is the Woolworths share price rising?
Investors have been buying the supermarket operator's shares after it released an update on strike action that has been taking place in distribution centres.
This industrial action is being taken in relation to the enterprise agreements at three distribution centres in Victoria and one distribution centre in New South Wales.
Woolworths Group notes that it has been engaging in good faith in negotiations with the United Workers Union (UWU) for over four months.
However, despite these lengthy discussions, the UWU negotiations remain unresolved. As a result, the UWU commenced indefinite strike action at the four sites on 21 November, with the strike action now extending to 12 days. This has led to some supermarket stores being left with empty shelves.
What's the issue?
The release notes that the UWU is seeking pay increases at these sites in excess of 25% over three years. This is materially above inflation and at a time when Woolworths Group claims to be actively working to keep food and groceries affordable for customers facing ongoing cost-of-living pressures.
The UWU is also demanding there be no enforceable performance standard or rate which would preclude Woolworths Group's ability to manage productivity. The supermarket giant notes that the use of labour standards to manage productivity is common practice in supply chains globally and in Australia.
Latest offer
Woolworths revealed that while each site is negotiating its own separate enterprise agreement (EA), it has put forward several offers with competitive pay that is above local market rates, and well above the Storage Services Award.
The latest offers would take hourly rates at these sites to approximately 40% above the award.
Importantly, the Shop, Distributive and Allied Employees' Association (SDA) also represents a number of the team members at the affected sites and has recently endorsed an offer by Woolworths Group to resolve the EA negotiations at one of the affected sites, the Melbourne South Regional DC (MSRDC).
Management also highlights that following this endorsement, Woolworths Group has made extensive enquiries to the team members at the MSRDC and a majority has expressed their desire to return to work. However, it has been unable to re-open the site due to UWU picketing the site and refusing to give any assurance of safe passage for those team members who wish to work.
It is possible that some investors believe this could be a sign that the strike action could end soon, which may explain why the Woolworths share price is rising today.
Sales impact
Woolworths advised that Australian Food sales have been negatively impacted by approximately $50 million to date. And until the industrial action is resolved, a further impact to sales is expected.
However, the full financial impact at this stage is unknown. It will be dependent on the duration and extent of the ongoing industrial action across the affected sites, and the time taken to rebuild inventory ahead of the Christmas trading period.
This was not factored into the forecast earnings range provided for Australian Food for the first half.
Woolworths Group CEO, Amanda Bardwell, said:
We sincerely apologise to all of our customers for the inconvenience caused by the inconsistency of supply across some product lines in some of our stores in Victoria, southern NSW and ACT. We are working hard to try and improve the situation and would like to thank our customers for their understanding and for treating our teams with respect.
