Smiths City Group took a $1.5 million charge on what it expects to reimburse underpaid staff following this year's Employment Court ruling that employees should've been paid for attending sales meetings, adding to a bigger trading loss than forecast and prompting it to suspend dividends.

The Christchurch-based retailer recognised the charge as a provision in its latest accounts, which note the payments will be calculated by August 8.

It will contribute to a $9.9m trading loss in the 12 months ended April 30, bigger than the projected loss of between $1.25m and $1.75m and turning around an operating profit of $2m a year earlier.

"In retrospect, we agree with the court," chief executive Roy Campbell said in a statement.


"We are working to finalise the exact figure and will move to reimburse of all affected staff progressively over the coming months as we locate those that worked for us in the past years."

The company reported a net loss of $7.2m, or 13.6 cents per share, in line with the April guidance, and turned from a profit of $2.4m, or 4.5 cents, a year earlier. Revenue fell 5.1 per cent to $215.9m. The shares dropped 7.1 per cent to 39 cents, adding to the 30 per cent slide so far this year.

The retailer is into the fourth year of a five-year transformation programme to drop low margin business, improve inventory management and expand its presence in Auckland, creating a national chain with a broader customer base.

"The board and management now believe the programme has not been sufficiently focused on delivering on our goal to help our customers to 'Live Better'," chair Alastair Kerr said.

"Additionally, the pace of change has not been fast enough to meet changing market conditions. The financial results we have released today have reinforced this view."

The company won't pay a final dividend this year to preserve funds and reinvest them back into the business, and the board doesn't expect to resume payments in the current financial year.