Woolworths underpayments scandal rises to $315m

Woolworths has raised its estimate of staff underpayments to $315 million across a larger number of employees than initially thought, with the final figure potentially even higher once a review into the nine-year scandal is complete.

The supermarket giant — which also owns Big W — on Wednesday said it would exceed its initial guess of $200 million to $300 million in salaried staff underpayments across 5700 team members, with 7000 staff now believed to be affected after reviewing five years of data.

The previous estimate was based on two years worth of information.

The underpayments issue also weighed on its first half profit result, which slipped 7.7 per cent to $887 million despite a 6 per cent increase in total revenue to $32.41 billion.

Chief executive Brad Banducci said he hoped the current underpayment estimates would not change any further as the company continued its “complex” review process.

He could not rule out any future underpayment issues.

"Never say never — (but) we do feel we’ve put a robust process in place,” Mr Banducci said.

Wednesday’s update comes after Woolworths told investors in December it expected the bill from the wages underpayment scandal to come in at the lower end of the $200 million to $300 million range first flagged in October.

The company initially discovered it had been keeping the cash when shocked store managers complained in early 2019 they were earning less than their staff.

Woolworths didn’t tell the Fair Work Ombudsman about the issue until August.

The company on Wednesday said it had repaid about $78 million to staff so far, including $69 million during FY20.

Woolies’ fierce rival Coles last week also owned up to underpaying staff, with the company expecting a $20 million hit after managers at its supermarkets and liquor division were underpaid over the past six years.

Other companies admitting to underpayments recently include Qantas, Super Retail Group, the ABC, Commonwealth Bank, Bunnings, Rockpool Dining Group, Michael Hill Jewellers, Sunglass Hut, 7-Eleven and George Calombaris’ hospitality group MAdE.

Shares in the Woolworths fell to as low as $40.50 at the open of trade and were still 3 per cent lower at $40.61 by 7.20am.

The company’s result for the six months to December 31 was hurt by a net $51 million in one-off costs related to the Endeavour Drinks separation, and another $80 million for the underpayments review.

Profit from continuing operations slipped 1.7 per cent on a year ago.

Total supermarket revenue increased 6.4 per cent to $21.2 billion over the half year, with comparable sales growth of 5.1 per cent fuelled by the Lion King Ooshie and Woolworths Discovery Garden campaigns.

However, comparable supermarket sales have slowed during the second half.

Mr Banducci also flagged the softness had continued into the second half amid a range of issues, including the coronavirus outbreak.

Big W, meanwhile, turned its first positive earnings result since 2016 — adding $50 million before interest and tax for the six-month period.

Woolworths attributed the department store’s improved performance to better product mix and continued cost management.

The soon-to-be-demerged Endeavour Drinks segment recorded 2.5 per cent comparable sales growth for the half and a 15 per cent increase in earnings before significant items to $338 million.

The company will pay a fully franked interim dividend of 46¢ a share, up 1¢ on a year ago.

AAP