Woolworths chairman James Strong said 'problem bambling is a complex social issue that will not be addressed with one simplistic solution.'

Woolworths chairman James Strong said 'problem bambling is a complex social issue that will not be addressed with one simplistic solution.' Photo: Erin Jonasson

A CAMPAIGN pressuring Woolworths to place bet limits on its 12,000 poker machines faces a setback with proxy advisers recommending investors reject the resolutions at a meeting later this month.

The extraordinary meeting, coinciding with Woolworths' annual meeting in Adelaide on November 22, will pit shareholders associated with activist group GetUp! - which requisitioned the meeting - against Woolworths' board.

Win or lose, the publicity is expected to further fuel the debate over whether Australia's largest grocer should also be the largest operator of something as socially divisive as poker machines.

Both ISS and CGI Glass Lewis recommended that shareholders vote against the resolution that would require Woolworths to limit bets on its poker machines to $1, and limit the machines' operating hours.

''Upon examination of both the proponents' and company's arguments, it is not considered that the proponents have provided a sufficient burden of proof that change is required at the company,'' ISS said in its report.

Rival proxy adviser CGI said Woolworths had implemented harm reduction measures ''above and beyond'' what was required by law, and more stringent measures to curb the risk of problem gambling ''may place the company at a significant competitive disadvantage''.

CGI did express concerns along with its support.

''While we are concerned regarding the company's unwillingness to publicly acknowledge the reputational risks associated with its gaming operations, we do not believe that the proponent has sufficiently demonstrated that the company's current management of this issue is deficient to the degree that warrants adoption of this proposal.''

In a letter to shareholders last month, Woolworths chairman James Strong said: ''Problem gambling is a complex social issue that will not be addressed with one simplistic solution that will apply only to Woolworths in isolation. Such an approach will not solve problem gambling, it will only disadvantage Woolworths' shareholders.''

But even financial market brokers have weighed in on the issue.

''One argument in favour of the resolution is that negative sentiment around Woolworths profiting from problem gambling might cause a consumer backlash resulting in a loss of retail sales,'' Citi analyst Craig Woolford said in a report this month.

Citi estimated that Woolworths earns about $140 million from poker machines before interest and tax, and estimated that if a backlash led to a 2.2 per cent drop in its sales across its supermarkets, liquor business and other stores, it would negate these earnings. ''However, we think a sustained consumer backlash of this size is unlikely,'' Citi said.

Shoppers would have a dilemma as Woolworths' rival, Wesfarmers-owned Coles, is also a significant poker machine operator via its pub operations. And Metcash, which operates the IGA supermarket chain, plans to copy Coles and Woolworths and break into the pubs and poker machine market.