SYDNEY (Reuters) - Australia’s Wesfarmers Ltd (WES.AX) defied broader retail headwinds to post a 5.7% rise in first-half profit on Wednesday, helped by demand in its hardware retail business, sending its shares up nearly 4% to a record high.
The retail-to-chemicals conglomerate said it was assessing the impact from the coronavirus outbreak but its businesses had not faced a significant impact so far though it revealed additional cases of staff underpayment.
The company said it had underpaid employees at its Target business by A$9 million ($6.02 million). This was on top of errors disclosed in October when it said about 6,000 staff were underpaid about A$15 million ($10.03 million) since 2010.
“Errors like these are unacceptable,” Managing Director Rob Scott said on a media call. He said immediate steps had been taken to correct these issues, notify and repay affected staff and ensure accuracy in the future through “a robust program of auditing and monitoring”.
The company did not disclose the total number of affected Target employees, but said they would be a low percentage of total staff.
Wesfarmers shares touched an intraday high of A$46.94 to close up 2.9%, their biggest gain in a year.
Several high-profile Australian companies have been embroiled in wages scandals, setting aside millions of dollars to repay affected employees. For details, see:
The government said it would introduce tougher laws that criminalize underpayment by companies and ban executives becoming company directors if they were involved in wage errors.
Excluding the impact from a new accounting standard, Wesfarmers reported a net profit after tax from continuing operations of A$1.14 billion ($762.32 million) for the six months to December, compared with A$1.08 billion a year earlier.
Revenue from continuing operations for the half-year rose 6% to A$15.25 billion and the company cut its interim dividend to 75 cents per share for the period from 100 cents a year earlier.
Sluggish wage growth and tepid inflation have crimped Australia’s retail sector for years, but the added impact of bushfires this summer has pressured consumption.
However, the company benefited from a strong performance at its hardware retail chain, Bunnings, which typically accounts for a big portion of its earnings.
Bunnings posted a 3.1% rise in pre-tax earnings to A$961 million for the six months, excluding the impact from new accounting standard.
“Bunnings’ sales performance was always going to be a key data point given its importance to the group and the rapid change in housing conditions,” Jefferies analysts said in a note.
“This is a good outcome (for Bunnings) and suggests that the improvement in house prices is driving demand.”
Reporting by Renju Jose in Sydney and Nikhil Subba, Rashmi Ashok in Bengaluru; Editing by Shailesh Kuber and Jacqueline Wong