The wage subsidy and retail: Which stores got it and who has paid it back?
Tuesday, 22 December 2020
Retailers are facing a moral quandary over whether to pay back the Government’s wage subsidy, with more and more big box stores deciding to return millions rather than face public backlash.
The wage subsidy scheme was announced in early March to ensure people didn’t lose their jobs during the Covid-19 pandemic.
Over the scheme’s lifetime, just over 750,000 businesses claimed $14 billion worth of Covid-19 wage subsidies.
However, the wage subsidy has been widely criticised as being too lenient, considering New Zealand’s economic recovery after the lockdown.
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Retail has largely bounced back and GDP grew 14 per cent in the September quarter.
Ministry of Social Development (MSD) figures from May show 25 per cent of all wage subsidy payouts were to firms with at least 100 employees. Of the $14b paid out through the scheme, that's around $3.5b to large firms.
Since August, a number of big businesses, particularly retailers, have reported significant profits despite the pandemic.
Increasingly, these businesses have been called on to pay back the wage subsidy.
Prime Minister Jacinda Ardern and leader of the Opposition Judith Collins both said in a leaders debate it was immoral for companies that posted a profit and paid dividends to have held on to the wage subsidy.
So which big retailers paid the wage subsidy back when shoppers returned to the stores in greater numbers than expected?
Briscoe Group
Briscoe Group, which includes Rebel Sport and Briscoes, received $11.5 million in wage subsidies for its 2000 staff.
Despite the time spent in alert level 4, none of the retail group’s staff were made redundant and none of the stores were permanently closed.
But Briscoe Group came under fire when it went on to pay a dividend to shareholders, despite having received the subsidy.
It posted an after-tax profit of $28m for the six months to July 30, compared to $28.4m for the first six months in the previous year, a mere 1.3 per cent decrease.
In October, Briscoe announced it would pay back the subsidy, with managing director Rod Duke saying it was the right thing to do.
The company later announced a special dividend of 6 cents.
The Warehouse Group
The Warehouse Group received $67.7m from the scheme for 11,000 staff.
The group, which operates The Warehouse, Warehouse Stationery, Noel Leeming and Torpedo7, faced criticism from unions and Prime Minister Jacinda Ardern who said she was “angry” at the company for continuing with restructuring and redundancies while getting the subsidy.
On Monday, the company announced it would repay the subsidy.
Harvey Norman
Australian-based retailer Harvey Norman received $12.7 million in wage subsidy for 1850 staff.
At the same time, Harvey Norman reported a year-on-year increase in profits of almost 20 per cent and a lift in New Zealand sales of more than 28 per cent.
For July and August, profits were up 185.8 per cent, Australian shareholders were told.
The company has not returned the wage subsidy.
Hallenstein Glasson
The owner of clothing chains Hallenstein Brothers and Glassons received $5.18m in wage subsidies for 866 staff.
In Australia, the company also accessed Jobseeker payments, totalling $4.98 million.
Hallenstein Glasson posted a net profit after tax of $27.8m in September, down 4.3 per cent but in line with the top of its forecast range released last month.
The fast fashion retailer saw sales recover after a big decline during the alert level 4 lockdown but said it had no plans to repay wage subsidies it received.
Michael Hill
Jeweller Michael Hill received $2.25m in wage subsidy for 326 staff, plus $1.32m in the wage subsidy extension for 287 staff, a total of $3.58m.
In September, the company reported a net profit after tax of A$3.05m (NZ$3.25m) down 81.5 per cent on the previous year.
Michael Hill closed three underperforming stores in New Zealand, five in Australia and one in Canada in May.
The jewellery retail chain told shareholders that its profit margin lifted between 100 and 200 basis points in its first quarter to September 27, compared with the same period a year earlier as online sales jumped 129 per cent.
Michael Hill International has been approached for comment regarding the wage subsidy.
Kathmandu
Outdoor retailer Kathmandu received $3.88m in wage subsidy for 689 staff, and $2.32m in wage subsidy extension for 567 staff, a total of $6.2m.
Sales plummeted $135m across Kathmandu’s retail and wholesale business and the company reported an $8.9m profit in the most recent financial year, down from $57.6m last year.
Kathmandu has been approached for comment regarding whether it would consider repaying the subsidy.
Farmers
Farmers’ parent company James Pascoe Group received $2.5m in wage subsidy for 449 staff, before claiming a further $464,784 for 443 in wage extension.
The company, owned by Anne and David Norman, is not listed on the NZX and doesn’t release its annual results. It is unknown how much of a profit the company has made in the last year.
The Farmers' Trading Company Ltd received $27m.
$23.94m for 3705 staff from the first wage subsidy and $4m for 3776 staff from the resurgence wage subsidy in September.