Woolworths has warned shoppers their grocery bills will “inevitably” jump in coming months as the supermarket chain wrangles soaring inflation, and a worsening wages underpayment scandal.
Woolies on Wednesday echoed great rival Coles in predicting more pain at the checkout through autumn and winter, tipping inflation to translate to price hikes of two to three per cent.
The warning comes after a pandemic-blighted half for the $43 billion grocery giant, during which its Big W network was affected by store closures and its suppliers still striving for some sense of normality.
Chief executive Brad Banducci said his company had been hurt by $277 million in Covid-related expenses in the six months to January 2, with an online-driven improvement sales unable to prevent profit from sliding.
He also said lingering inflationary pressures would – much like Coles – force it to pass some costs on to the customer.
“It is inevitable that some prices will increase,” Mr Banducci told investors on Wednesday.
“However, we will continue to work hard to ensure that we provide our customers with great value and affordable alternatives,”
Mr Banducci’s warning comes after Woolworths admitted a deepening staff underpayment scandal was weighing it down.
The company on Wednesday said an ongoing payroll review of the had uncovered another $144 million in underpayments, taking the total bill so far to $571 mixjmtzywllion.
That’s nearly double the initial $300 million that was tipped in late 2019 when the underpayments matter was first reported.
The review is expected to run to the end of 2022, and could see provisions rise further.
“We are disappointed to have identified further inadvertent underpayments and unreservedly apologise to our affected team members,” Mr Banducci said.
“We will continue to fix issues when we identify them and introduce the right controls to prevent them from happening again.”
Overall group sales across Woolworths’ 1000 supermarkets and 150 Big W stores rose to $31.9 billion in the first six months of the year as the impact of lockdowns and store closures was offset by a surge in eCommerce.
Profit from continuing operations fell 21 per cent to $676 million for the half – mainly due to extra Covid costs and remediation payments – forcing the company to record its lowest interim dividend since 2017.
Woolworths investors will get 39 cents per share, fully franked, on April 13.
That’s down from 53 cents a year ago, and 46 cents in 2020.
Despite the complexities affecting Wednesday’s report, the market appeared pleased with Woolworths’ figures.
Shares were up 1.3 per cent to $35.66 at lunchtime, having earlier touched their highest in a month at $36.77.
“While the far-reaching impacts of Covid resulted in one of the most challenging halves we have experienced, we ended (the first half) strongly with positive trading momentum and helped our customers enjoy a much-needed Christmas celebration and festive holiday season,” Mr Banducci said.
“Omicron created new challenges in early January with a record number of team members isolating and material supply chain and stock flow issues. However, having learned from the Delta outbreak, we responded with agility and are gradually moving into a more consistent operating rhythm.”
Group Covid costs in the first seven weeks of the second half had so far added up to $34 million, but are expected to ease.
Big W is again expected to have a challenging half, although the 150 stores across the country are tipped to turn a combined profit.
Woolworths says it plans to open 10 to 25 new supermarkets in Australia over the next three to five years and another 5 to 15 Metro Food stores.
