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Woolworths revises underpayments estimate to $315 million

Woolworths has increased its estimation of staff underpayments by $15 million, with the total figure now expected to be at least $315 million.

The supermarket giant made the announcement alongside its half year results saying that despite a strong performance, it was “disappointed” to have let staff down in relation to underpayments.

“With further data analysis, and an expanded scope to include all Group businesses covered by the GRIA, we have also updated our original estimate to a gross before-tax cost of $315 million relating to salary payment shortfalls and $80 million of interest and other costs,” the retailer said in a statement to the ASX on Wednesday morning.

“The calculations of the salary payment shortfall involve a substantial volume of data, a high degree of complexity, interpretation, estimations, and are subject to further analysis of prior periods and the Fair Work Ombudsman’s ongoing investigation.”

The underpayments scandal impacted first half profit, which dipped by 7.7 per cent to $887 million, despite a significant revenue increase.

To date, Woolworths said it has paid back $69 million to staff.

The Group reported that all businesses delivered sales and earnings growth in the half year despite a “volatile trading environment”.

Group sales from continuing operations increased by 6.0 per cent to $32.4 billion in the half and EBIT from continuing operations before significant items increased by 11.4 per cent.

In Australian food, EBIT grew by 8.0 per cent in the first half due to strong sales growth and despite higher costs as a result of the new Enterprise Agreement.

Supermarket revenue increased by 6.4 per cent to $21.2 billion. Sales growth surpassed expectations in the first quarter due to the success of Lion King and Discovery Garden collectables campaigns, while sales growth in Q2 remained solid at 4.9 per cent.

Group online sales increased by 31.6 per cent with online penetration for the half standing at 5.1 per cent.

Across the water, New Zealand food had a strong half with sales growth of 4.8 per cent and EBIT growth of 6.4 per cent.

The supermarket opened nine new Metro stores in the half, including the first of the Caltex Metro convenience stores.

Endeavour Drinks, which is expected to merge with the hospitality business to form Endeavour Group, recorded total sales growth of 4.7 per cent in the first half, with comparable sales growth in Q2 of 1.8 per cent helped by new store openings.

One-off costs relating to the Endeavour transformation, totalling $51 million, also impacted the half year result.

“It was a half with many positives but also material challenges,” chairman Gordon Cairns said.

“While some of the challenges will continue to be felt in the second half, as as business, we also have a lot to be positive about as we look forward to moving from ownership to partnership with Endeavour Group.”

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