My local Woodcraft seems to be doing all right WRT Festool. They brought in the new abrasives. It's hard to tell if they are cutting back their Festool display - it's a little low right now, but that may be due to Christmas sales. They are great about ordering if needed. They have a couple of guys who are the Festool experts, and the rest of the salespersons get by. Festool has very strict controls on retailers, and I imagine that the local franchise owners chafe under those controls at times.
I'm more worried about a broader Woodcraft tendency to winnow out the high end suppliers like Festool, Lie Nielsen, Veritas, and Woodpeckers. Wood River just doesn't cut it. The latest socket tang chisels are advertised as "tempered in salt bath to HRC58-63." There's a big difference between 58 and 63 - I'll take PMV-11 or Japanese chisels. Wood River planes consistently are dinged for machining faults, and while they may be minor, for just a bit more you can get the near perfection of Lie Nielsen or Veritas. In the case of Wood River, they are just trying to break into the high end market themselves. Lately they've been using Wood River to compete with Veritas in areas like marking gauges. It may be my imagination, but it also seems that they have been carrying fewer Woodpecker tools.
But overall Woodcraft serves an important place in my woodworking ecosystem. They are less than 30 minutes from my house. They carry good quality stuff for the most part. If I need something now, even if I can't get exactly what I want, I can usually come close. Our local Woodcraft in particular has a great selection of wood, and they are generally very reasonably priced, especially their frequent specials. They seem to be one of the few local suppliers to realize that keeping people stocked with interesting, reasonably priced wood promotes woodworking as an activity.
Overall, they are just trying to do things that will maximize their profitability. Some things work, and some things backfire. I personally wish that they would carry more of the quality lines like Festool, Veritas, and Lie Nielsen, but I can always get what I want elsewhere if I have to, and meantime I'm glad they are there for the stuff they do well.