Target rebates artifically boosted earnings
Wesfarmers commenced the investigation on March 24, which found Target struck deals with 31 overseas suppliers to pay rebates worth $18.1 million, which would be paid back to the suppliers in the second half in the form of higher prices.
Additionally, a number of supply arrangements amounting to less than $3 million were found to not comply strictly with the group’s accounting policies.
Target’s earnings before interest and tax would have been $53 million, as compared to the $74 million reported.
Wesfarmers said Target is now working with the suppliers to unwind these agreements and no cash had changed hands.
“There is no excuse for this conduct,” said Wesfarmer CEO Richard Goyder.
“We set very clear direction and expectations at Wesfarmers crystallised in our code of conduct, and supported by detailed group policies, divisionally specific accounting policies, and regular staff training. We encourage and expect adherence to a strong culture of managing for long term sustainable growth over short term gain, which is regularly reinforced by the Wesfarmers board and which should have guided behaviour.
“Wesfarmers will take immediate action throughout the group to reinforce the importance of compliance with its policies and governance practices.”
So far, three senior Target employees have resigned over the scandal, including former Target MD Stuart Machin, who quit on Friday.
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