$20m staff underpayment casts shadow over Coles results
18 February 2020, Written by David Simmons
Update: Since this story was published, Coles' former parent company Wesfarmers has announced it will sell around $1.1 billion worth of shares in the retailer. Click here for more details.
Retail giant Coles (ASX: COL) has admitted to underpaying a small number of staff by $20 million over the last six years, in conjunction with its 1H20 financial results this morning.
As part of a review into its remuneration frameworks for employees, Coles discovered less than 1 per cent of its total team members received less than required.
For context, Coles currently employs more than 113,000 employees, meaning under 1,130 staff would be affected by the discrepancies in remuneration identified by the retail chain.
Specifically, 5 per cent of managers in Coles' Liquor business were underpaid by an estimated $3 million.
Another 5 per cent of Coles' Supermarket managers are also affected by the underpayment differences by an estimated $12 million.
Coles has taken a provision of $5 million for interests and on costs to ensure staff receive what they are entitled to under the General Retail Industry Award.
While $20 million in underpayments might sound significant, it falls well below the estimated $300 million rival Woolworths Group (ASX: WOW) found it had owed its employees.
The Woolworths revelation sent shockwaves through the listed company, resulting in CEO Brad Banducci and chairman Gordon Cairns slashing their pay packets.
The scandal also prompted an Australian law firm to launch a class action lawsuit against Woolworths, with Adero Law alleging the supermarket actually owes employees around $620 million in remuneration.
The announcement from Coles put a dampener on what would have been a positive day for the company as it released its 1H20 results.
Coles saw both its EBIT and profit from ordinary activities rise on the back of heavy investments into home-brand products.
Its strategy to focus on what Coles calls 'Own Brand' products resulted in the company achieving sales in excess of $1 billion in December from its in-house products alone.
The company also saw success after it rolled out an Own Brand vegetarian range to 114 supermarkets, in addition to 3,000 new products generally.
Overall total revenue was down 5.7 per cent to $19 billion which Coles attributes to a New Alliance Agreement in Express under which commission income rather than gross fuel sales revenue has been recognised from March 2019.
Its NPAT was also down by 33.7 per cent to $489 million as a result of 1H19 profits including results from Kmart, Target, and Officeworks businesses which were transferred to Wesfarmers prior to Coles' demerger.
Shares in Coles are down 1.01 per cent to $16.74 per share at 1.20pm AEDT.
Business News Australia
Author: David Simmons