Staff underpayment costs wipe $485m from Woolworths’ first-half net profit

Supermarket giant Woolworths has beaten investor expectations, despite taking a $485m hit to its profit after a court ruling. Group earnings for the half year to December rose 14.4 per cent to $1.66bn, with profit before significant items up 16.4 per cent to $859m, Woolworths Group announced on Wednesday. But it copped a 49.4 per cent drop in its net profit to $374m, thanks to the $485m it had to spend to remediate underpaid salaried staff following a Federal Court ruling last September. Across its stores in Australia for the six months to December, sales increased by 3.6 per cent to $27.63bn, with earnings up 9.9 per cent to $1.51bn. EToro market analyst Josh Gilbert said Woolworths’ financial results came in better than expectations. “It’s been a tough couple of years for Woolworths, with cost-of-living pressures, industrial action and intense competition for market share,” Mr Gilbert said. “While today’s result isn’t the smoking gun to silence all the bears, it is a sign of things starting to turn. “Investors who look past the $485m after-tax wage remediation provision dragging down the headline number will find a business that beat expectations on underlying profit … with early momentum in the second half suggesting there’s more to come.” Woolworths had also pegged back losses to Coles. “Australian Food margins expanded for the first time in a while, a step forward for a business that spent much of FY25 losing ground to Coles,’ he said. “Eight consecutive quarters of year-on-year price declines show Woolworths is serious about winning back cost-conscious shoppers, and it appears to be working.” A 14.6 per cent uptick in online sales to $5.4bn – pick-up and direct to boot shopping – “is exactly what Woolworths needed to make its eCommerce business profitable over the long run”, Mr Gilbert said. “With Coles reporting on Friday, the market will get a much clearer picture of how the grocery wars are actually playing out between this duopoly.” Chief executive Amanda Bardwell remained optimistic that Woolies was on track. “Customers continue to be value-focused, shopping multiple retailers in a highly competitive environment,” she said in a statement to the ASX. “Our focus is to continue to provide value to customers, rebuild trust and maintain sales momentum while making further progress on our strategic priorities to deliver for our customers, teams and shareholders.” The company declared an interim dividend of 45c per share, up from 39c, payable on April 2. In a teleconference with reporters, the chief executive said she would not comment on the current court case between the consumer watchdog and Coles, nor Woolworths’ impending case against the regulator. The Australian Competition and Consumer Commission is separately suing the two major supermarkets, alleging they hiked prices on hundreds of items and then listed those items for ‘sale’ above the original price. “At Woolworths we provide value through our lower shelf price program … that’s important because customers need to be able to count on us and have reliable access to that value,” Ms Bardwell said. She said its “lower shelf price program” – which she said were reductions on household staples such as bread, milk and chicken breast – weekly specials and its loyalty program were the supermarket’s key value offerings. “In certain segments, young families, for example, there is an increased focus on how they can save in their weekly shop and we’ve seen that play through. “Customers are seeking value and we’ve seen that actually increase over the last six and seven months. “We see customers looking for more specials, they’re comparing prices more and actually they’re cooking at home more as well.” Customers were increasingly relying on discounted food items, she said. “We’ve seen increased participation in specials across the year and we’ve been very focused on making sure that we improve the availability of those products, so that when they are on special, customers again can count on them being available when they turn up to their shop.”