Registered users can save articles to their personal articles list. Login here or sign up here

The last thing Woolies needs right now …

Something is up at WHL Australia – it’s just not clear what.

There is – seemingly – a storm brewing at Woolworths’ Australian operations. Whether it will blow over or escalate into a hurricane will be seen (what’s not likely is that it’s a storm in a teacup).

On Thursday, the retailer announced the resignation of David Thomas, the CEO of David Jones, the department store chain it bought in 2014. The terse 53-word statement said Thomas had “resigned for personal reasons”; it gave no indication of whether he would leave immediately. Normally these pieces of corporate verbiage pay some sort of tribute to the departing executive and thank them for their service. The Woolies statement did not.

Read: Woolworths Australia CEO exit shows unit’s lack of stability

Thomas was promoted to head the David Jones business from September 2017 after its CEO John Dixon was elevated to the newly created position of CEO for Australasia. The group justified this additional level of management, saying “the creation of a single regional structure is the logical next step for our business”. Dixon joined the group’s board ahead of assuming the regional CEO position.

Less than nine months later this unravelled, with Dixon’s position being “discontinued” immediately following what the group termed a “strategic cost review”. Since May last year, David Jones’s Thomas and Country Road Group CEO Scott Fyfe reported directly to Woolworths group CEO Ian Moir.

Now that Thomas is out, Moir will “work directly with the David Jones management team in the interim”.

Two working days later, Woolworths announced the completely unexpected departure of independent non-executive directors Gail Kelly and Patrick Allaway, both Australian, with immediate effect.

This is highly unusual.

Non-executive directors do not suddenly resign (both were reappointed with 90%-plus support at the retailer’s November AGM). And they certainly do not resign in concert. And, in potentially sensitive departures like this – where the market could infer the wrong message – the actual resignation dates and announcements are often carefully stage-managed.

Kelly, a South-African born Australian banker, joined the board in October 2015. Allaway, appointed in December 2014, has over 30 years’ experience in finance and banking. Woolworths no longer has any Australian directors on its board (with the exception of Moir).

It is likely that this, and the events of last week, are not unrelated.

Shareholders are surely wondering if there was a battle at board level. Was there such a severe disagreement about governance or strategy or an appointment (or forcing out, as it may be) that both Australian directors felt compelled to resign? Or was it something else entirely?

What is clear is that all is not well at WHL Australia.

For shareholders, having Moir spend an increasing portion of his time running David Jones is probably not the desired outcome.

The market perception is that the David Jones turnaround will labour on forever. Everyone already accepts that Woolworths overpaid for the asset. However, comparable store sales at David Jones are up after a tough 2017. In the six months to June (its fiscal second-half), sales were up 2.7% at existing stores. In the run-up to the festive season (26 weeks to December 23), comparable sales were up 0.9%.

But there are far, far bigger problems in its home market.

For the year to June 24, Woolworths Fashion, Beauty and Home (previously ‘clothing’) reported comparable store sales that were down 4.1%. In the run-up to Christmas this had “recovered” to a drop of just 2.4%.

Fashion, Beauty, Home

Comparable stores

Sales

Price movement

Comp stores, excl. inflation

26 weeks to December 23, 2018

-2.4%

-2%

1.7%

-4.1%

52 weeks to June 24, 2018

-4.1%

-1.5%

0.8%

-4.9%

26 weeks to December 24, 2017

-3.4%

-0.2%

0.7%

-4.1%

52 weeks to June 25, 2017

-0.9%

1.4%

6.6%

-7.5%

26 weeks to December 25, 2016

1.2%

3.5%

7.3%

-6.1%

Yes, the consumer environment is the toughest it’s been in years, unsurprising for an economy at stall-speed. But this is not a business in rude health. And it’s certainly not as ‘bulletproof’ as it once was.

The group has admitted to “poor execution in clothing”, with this being particularly pronounced in womenswear last year. It rolled out and then rapidly rolled back the David Jones private label in South Africa. The move to replace what you would recognise as Woolworths’s ‘classic’ range fell completely flat.

Read: The Woolworths fashion mea culpa

Add to this a number of high-profile mistakes – the latest being a second accusation of product copying (that of a type of latte) following on from the recent Ubuntu Baba baby carrier saga, as well as a wholly tone-deaf Valentine’s Day marketing campaign – and it is clear there are big problems in the core Woolworths business.

Moir should be focusing a lot more time and attention on the South African clothing business. The seasoned retailer doesn’t have that right now, not with whatever’s happening in Australia. (It certainly wouldn’t be a surprise to have more news on that front in the coming weeks …)

Moir has got to be thankful his food strategy has paid off handsomely, or he might have been out a while ago. 

Hilton Tarrant works at YFM. He can still be contacted at hilton@moneyweb.co.za.

Get access to Moneyweb's financial intelligence and support quality journalism for only
R63/month or R630/year.
Sign up here, cancel at any time.

AUTHOR PROFILE

COMMENTS   12

To comment, you must be registered and logged in.

LOGIN HERE

Don't have an account?
Sign up for FREE

Woolworths need to separate the two businesses completely.

The South African business need management and board that cannot be interrupted by Aussie crisis. Woolworths is losing focus over the Aussie business. They need now more than ever to be strategic regarding their South African business

This is also something that Woolworths won’t want.

https://superlatte.com/woolworths-cafe/?fbclid=IwAR3OvcfpXfQTt6j7P8UZcjvpPqYBW4pdFXurL9_F63Rox6rrcyk6hKrakB8

Oh, dear lord, now this woman thinks she invented and has the rights to the word “super” as a modifier to describe a product, or that she came up with the idea of adding turmeric to hot beverages…or the cliche of superfoods.

It reminds me of the fight between Microsoft and Apple over who came up with the concept of a user-interface with windows and icons. When Apple tried to accuse Microsoft of intellectual property theft, Bill Gates’s response was,
“Well, Steve [Jobs]… I think it’s more like we both had this rich neighbour named Xerox and I broke into his house to steal the TV set and found out that you had already stolen it.”

This is what one wants from a financial journalist. Intuitive factual article that gets a reader to think. Well done. Keep digging. At R45 something could be very ill here

Our local Woolies has frequent empty shelves, and lately the fruit’s been looking a bit tired. Supply chain problems?

It seems Moir clings to his job by hollowing out management, ensuring there is no successor and blaming management down the chain. He destroyed massive value through one of the worst corporate deals in history and should have been long gone. Buying a department store at a premium when the trend is clearly going one way, expecting the Aussie public to scramble to get their hands on the Re and W brands…

Successful companies will ultimate fall for the usual mistake of single men did it all. Ones the glory is coming from the top pyramid stone, decline start.

I’m not entirely sure what you’re saying, Bas, but I upvoted you nonetheless.

For a moment the thought arose “is this a small Steinhoff in the making?”

Then realised Viceroy hasn’t shorted it yet.

Woolworths should go back to basics and go back to find the buyers that it had 7 to 10 years ago. They had an eye and talent for fashion and picking the right stuff.

The game in the clothing retail has changed. Watched a documentary on Netflix “The real cost” about the cut throat textile industry. Fashions don’t change by season anymore, they change every week. The good old days when buyers went to Europe to see what is in fashion for the next season, is long gone. H&M are the big disrupters in the clothing market, and keep forcing the prices down. With the kind of volumes they are buying from Bangladesh at slave labour costs, nobody is gonna make the money they used to make, buy thinking the old way.

In 2014 I made a bet with a friend about Woolies. My view was that Woolworths made a bad decision to buy DJ and that it will come back to haunt them (and prob lead to the departure of Ian Moir). The Woolies share price was R79 per share and for a while grew handsomely until it peaked at R102 before plummeting off a cliff, and the falling down the mountain like one those snowboarders you see on Youtube.

Load All 12 Comments
End of comments.

LATEST CURRENCIES  

USD / ZAR
GBP / ZAR
EUR / ZAR
GO TO SHOP CART

Follow us:

Search Articles:Advanced Search
Click a Company:
server: 172.17.0.2