Woolworths Group reports a 3.4% revenue increase to $37.1 billion but sees profit before significant items nearly halve due to a $710 million payroll remediation provision. The company declares a higher fully franked interim dividend of 45 cents per share.
- Revenue rises 3.4% to $37.1 billion
- Profit before significant items drops 49.4% to $374 million
- $710 million provision for payroll remediation impacts results
- Interim dividend increased to 45 cents per share, fully franked
- Ongoing legal and regulatory proceedings remain unresolved
Revenue Growth Amidst Profit Pressure
Woolworths Group Limited has released its half-year financial results for the period ending 4 January 2026, showing a modest 3.4% increase in revenue to $37.1 billion. However, this top-line growth was overshadowed by a sharp 49.4% decline in profit before significant items, which fell to $374 million. The primary driver behind this profit contraction was a substantial $710 million provision related to a payroll remediation program addressing historical underpayments to award-covered salaried store team leaders.
Payroll Remediation and Its Financial Impact
The payroll remediation provision stems from a Federal Court decision received in September 2025 concerning underpayments dating back several years. Woolworths has been engaged in an extensive review and remediation process since 2021, with the current provision reflecting further potential liabilities including interest, superannuation, and payroll tax. This provision falls within the previously disclosed range of $450 million to $750 million, underscoring the significant financial and operational challenges Woolworths faces in resolving legacy payroll issues.
Dividend Policy and Shareholder Returns
Despite the profit hit, Woolworths has declared an interim dividend of 45 cents per share, up from 39 cents in the prior corresponding period. The dividend remains fully franked at a 30% tax rate, signalling the company’s commitment to returning value to shareholders. The Dividend Reinvestment Plan (DRP) continues to be active, with no discount applied and no limit on participation, reflecting confidence in the Group’s cash flow and capital management.
Segment Performance and Operational Highlights
Segment reporting reveals that Australian Food remains the largest contributor to revenue and earnings, with other divisions such as Australian B2B, New Zealand Food, and W Living also contributing to the Group’s overall performance. The Group has also undertaken segment reclassifications following the closure of MyDeal, aiming to streamline reporting and better reflect operational realities. Capital expenditure commitments stand at $1.15 billion, indicating ongoing investment in infrastructure and growth initiatives.
Regulatory and Legal Challenges Persist
Woolworths continues to face regulatory scrutiny and legal proceedings, including actions by the Australian Competition and Consumer Commission (ACCC) and the New Zealand Commerce Commission (NZCC) related to pricing practices. These proceedings remain unresolved and represent contingent liabilities with uncertain outcomes. The Group’s provisions and financial statements reflect the best estimates of liabilities, but the final impact could vary depending on future developments.
Outlook and Governance
The Board remains confident in Woolworths’ ability to meet its obligations and continue operations despite a net current liability position driven by working capital dynamics and lease obligations. The financial report was reviewed by Deloitte with no material issues identified. Recent Board changes include the retirement of Tracey Fellows and the appointment of Jon Alferness, signalling ongoing governance evolution as the Group navigates its complex operating environment.
Bottom Line?
Woolworths’ financial resilience is tested by legacy payroll costs and regulatory risks, setting the stage for a critical period ahead.
Questions in the middle?
- How will ongoing legal proceedings with the Federal Court and regulators affect future provisions?
- What operational changes will Woolworths implement to prevent future payroll compliance issues?
- How might the increased interim dividend influence investor sentiment amid profit pressures?