“You would hope where the JobKeeper subsidy has been material to the company’s result that will be called out explicitly in the forthcoming reporting season,” he said.
“It’s been such a stimulus that the withdrawal of it will be material, and it’s notable many companies have not been explicit about what the impact of it has been.”
Online sales have continued to boom for retailers during the pandemic and a gradual reopening of stores through May and June has also helped the sector claw back some ground.
ASX-listed footwear retailer Accent Group – which operates brands such as Platypus, Hype DC and Athlete’s Foot – told shareholders on June 25 its total earnings before interest, tax, depreciation and amortisation would be 10 per cent higher for the year, or around $120 million.
Accent cited strong digital sales and the support of government programs as a reason for its increased profit, with the retailer’s 5000-odd employees collecting the subsidies in recent months.
With six payments issued to date, Accent may have received upwards of $30 million from the JobKeeper scheme. The New Zealand government’s wage subsidy index shows the company has received $NZ2.2 million ($2.07 million) for its stores in the country.
Similarly, Harvey Norman has collected $12 million in payments from the New Zealand government, and founder Gerry Harvey confirmed to The Age and The Sydney Morning Herald a couple of Australian franchisees had also signed on to the JobKeeper scheme. Harvey Norman also told investors to expect a profit boost for the full year, saying adjusted profit before tax would increase 20 per cent to around $450 million.
Mr Paatsch said investors should keep an eagle eye on executive bonuses come the end of the year, given they are closely linked to profit figures and share price performance. Following its profit upgrade, Accent Group shares rose nearly 10 per cent.
“Investors are right to be sceptical where executives are drawing bonuses at the same time as claiming JobKeeper,” he said.”I don’t think it was ever the intention of the government to subsidise executive salaries.”
James Cook, chief investment officer at ESG-focused fund U Ethical, said onus will be on shareholders to strike down any remuneration report which doesn’t accurately reflect government subsidies.
“If executive remuneration has been artificially stimulated at the taxpayer’s expense, that shouldn’t warrant a bonus based on whatever marginal performance that generates,” he said.
“The onus will be on shareholders because it’d be a disappointing free-kick to give to management. It’s certainly something we’d look at in our voting policy.”
Despite the subsidy being a fillip for company earnings, analysts have said they will ignore profit figures for companies taking JobKeeper, with Citi’s head of research Craig Woolford saying it was causing a “distorted picture” of company performance.
“We would discount the relevance of the current year’s figures and prefer to look forward to what 2021/2022 earnings really look like without the prop of JobKeeper,” he said.
The analyst also backed calls for companies to isolate any contribution from JobKeeper on wage expenses when reporting in August.
“What we’ve seen from some companies in New Zealand is they’ve itemised the amount of wage subsidy that they received. I think that disclosure will help us understand the impact that JobKeeper has had on a business,” he said.
In a fact sheet released in early June, corporate regulator ASIC advised companies to take significant discretion with remuneration for the year, including a missive to “avoid unintended variable pay outcomes” arising as a result of COVID-19.
A spokesperson for Harvey Norman said executives’ remuneration was subject to oversight from the company’s remuneration committee, which was aware of ASIC’s warning, especially around “unintended windfall gains”.
Australian Council of Superannuation Investors (ACSI) chief executive Louise Davidson said it was imperative for boards to read the room and ensure discretion over executive payments.
“Given the extent of the economic pain being felt across the entire community and the market, this is clearly a time when investors expect to see restraint on executive pay,” she said.
Accent Group did not respond prior to deadline.
Dominic Powell writes about the retail industry for the Sydney Morning Herald and The Age.