Costs hit for Woolies

Earnings to dip amid big changes

WOOLWORTHS expects full year earnings could be 2.7 per cent lower after it outlined one-off charges worth $591 million for restructuring and staff underpayments and incurs additional costs related to COVID-19.

The retailer said it expected full year earnings before interest and tax to be in the range of $3.2 billion to $3.25 billion, compared with $3.29 billion last year.

The biggest hit will be sustained in its Endeavour Group hotels and drinks business, with earnings expected to slide more than 50 per cent to between $160 million and $170 million, as venues stayed shut on account of coronavirus lockdowns.

It will also incur costs of $230 million towards restructure of the Endeavour business, which it planned to de-merge but deferred due to the COVID pandemic.

Woolworths’ earnings will also be impacted by close to $275 million in incremental costs in the June quarter, related to COVID-19 for store hygiene, social distancing and supply chain flexibility.

The company will report full year results on August 27.

The retailer has further outlined $185 million to reimburse staff underpaid over almost a decade.

The total cost of unpaid staff wages has blown out to $390 million after the company identified underpayments to employees in its hotels division.

The company announced plans to develop an automated regional distribution centre and a semi-automated national distribution centre in Sydney.

The facilities will replace operations at the Sydney regional distribution centre, Sydney national distribution centre and Melbourne national distribution centre.

Woolworths said it would invest $700 million to $780 million in technology and the fit-out of the two distribution centres over four years.

It will result in a one-off pre-tax cost of $176 million in the FY20 accounts.

Meanwhile, the retail giant said trading so far in the June quarter had continued to be strong, with food sales in Australia up 8.6 per cent, and in New Zealand up 15.1 per cent.

Sales at Big W jumped 27.8 per cent in the 10 weeks to June 14, while the Endeavour drinks business saw a 21.4 per cent growth for the same period.