Woolworths (ASX:WOW) fails the pub test with Darwin Dan Murphy’s

The Woolworths Group Ltd (ASX: WOW) share price is firmly in the red following the release of two statements to the ASX today.

They include the company’s quarterly sales update which we talked about at the Motley Fool this morning, and an announcement on its proposed Dan Murphy’s outlet near Darwin’s airport.

At the time of writing, the Woolworths share price is down 3.62%, trading at $39.91 per share. Meanwhile, the S&P/ASX 200 Index (ASX: XJO) is 0.24% higher.

Let’s delve into the update on Dan Murphy’s.

Thumbs down from independent review

Following plenty of pushback from various organisations, Woolworths launched an independent panel review into its proposed Dan Murphy’s in Darwin. This review was led by the co-founder of law firm Gilbert + Tobin, Danny Gilbert.

Gilbert’s review focused on several key areas. These included assessing the adequacy of stakeholder engagement with respect to public health concerns; the extent to which stakeholder concerns are factored into decision-making; and best practices for the supply of alcohol in the best interests of Aboriginal and Torres Strait Islander people.

BREAKING: Woolworths Group just announced they are NOT proceeding with Darwin Dan Murphys development!
Congratulations to Aunty Helen, Olivia Williams (BlakBusiness), @FAREAustralia, and the NT orgs who fought so hard to protect the Bagot community. #KeepGrogOut pic.twitter.com/t3KUsKsfX2

— Nic Holas (@nicheholas) April 28, 2021

https://platform.twitter.com/widgets.js

Today, Woolworths has announced that it will not proceed with the Dan Murphy’s development in Darwin. The abandonment of the project follows Gilbert’s panel advising not to go ahead based on their findings. In addition to its sales update, the announcement has been met with a decline in the Woolworths share price.

In the release, Woolworths’ divulged some of Gilbert’s findings, as follows:

The Gilbert Review has made it clear that we did not do enough in this community to live up to the best practice engagement to which we hold ourselves accountable.

In particular, we did not do enough stakeholder engagement with a range of Aboriginal and Torres Strait Islander communities and organisations.

Woolworths intends to release the Gilbert review in full no later than mid-June.

Woolworths share price socially distancing

It is probably no coincidence that Woolworths is looking to spin off the Endeavour Drinks division by the end of June. This would allow Woolworths to hold a stake in the business but distance itself from the social blowback surrounding alcohol businesses.

CEO Brad Banducci stated that any decision to open a Dan Murphy’s store in the future would be in the hands of Endeavour Drinks management. Demonstrating the already developing efforts in separating the businesses.

The strategic move may alleviate social pressures on the Woolworths share price in the future. Meanwhile, Woolworths would still stand to gain from a mega-store opening if it held a position in the spin-off.

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Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Woolworths Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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