Woolworths share price under pressure amid wage underpayments

The Woolworths Ltd (ASX: WOW) share price could come under further pressure as shareholders ask questions about the underpayment of wages.

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The Woolworths Group Ltd (ASX: WOW) share price could be in for a difficult November as its wage underpayment scandal continues.

Why is the Woolworths share price under pressure?

An Australian Financial Review (AFR) article is reporting a shareholder strike is likely at next month's Annual General Meeting (AGM).

Woolworths Chairman Gordon Cairns is reportedly in for a grilling from the Australian Shareholders Association (ASA) this week, following the recent news that Woolworths underpaid its staff by $300 million.

Woolworths staff were reportedly underpaid on their contracts compared to the General Retail Industry Award (GRIA). The repayment costs could total $200 million to $300 million before tax, which would hit Woolworths' FY20 profit.

This has reportedly triggered audits by several other major retailers keen to avoid a similar public exposure.

The Woolworths share price has been flat since the start of November as it looks to contain the damage.

What about Woolworths' quarterly update?

Woolworths had a strong September quarter with total sales up 7.1% led by its Australian Food segment.

Similar sales growth was seen in its New Zealand Food (+8%) and Hotels (+5.5%) segments.

Online sales jumped a whopping 43.2% higher, while average prices edged 0.3% higher in the quarter.

How has the Woolworths share price performed in 2019?

The Woolworths share price has been quietly climbing higher this year and is up 29.37% year-to-date (YTD).

This is a strong outperformance over the S&P/ASX 200 Index (INDEXASX: XJO), especially in the current weak retail environment.

Woolworths does operate in the Consumer Discretionary sector, which should be less volatile through the economic cycle.

This could be a key benefit of adding Woolworths shares to your portfolio if you're worried about a 2020 recession.

Foolish takeaway

Buying Woolworths shares at the moment could be a little risky for my liking.

I'd wait until the company's 1H 2020 results in February given the upcoming AGM and finalisation of wage repayments.

Intense scrutiny and potential shareholder activism would be enough to keep me from buying in 2019.

Motley Fool contributor Kenneth Hall has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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