Woolworths [JSE:WHL] Chief Executive Ian Moir has his work cut out.
The head of the South African seller of organic food and designer clothing has to use Thursday’s first-half earnings day to convince investors that his plan to create a southern hemisphere retail giant can succeed, even after a spate of resignations at its troubled Australian department-store chain David Jones.
Woolworths bought David Jones for $2bn in 2014, but the move turned sour when a revaluation of the almost 200-year-old business led to a 2018 write-down of 712.5m Australian dollars ($510m).
That contributed to the retailer’s first annual loss since at least 2002. The rot has continued with the resignation of two Australian non-executive directors resigned last week, hot on the heels of David Jones CEO David Thomas, the third head of that business to leave in five years.
Cape Town-based Woolworths said Moir, 60, will work directly with management in Australia while a replacement is found.
“This is bad timing,” said Charles Allen, an analyst at Bloomberg Intelligence. “You can’t run a company like David Jones remotely from South Africa and they will urgently need to find replacements. Actually there needs to be a clearer route for succession planning for the company as a whole.”
Sluggish MarketLast month, Woolworths reported that the unit’s comparable store sales rose less than 1 percent as growth from new stores was offset by disruptions at existing outlets, notably from refurbishments at its flagship Elizabeth Street store in Sydney. Meanwhile the Australian market is sluggish, with retail sales growth slowing to 2.1 percent in December from 3.3% the month before.
“There is room for a luxury department store in Sydney, but the best plan for next tier down is not nearly so obvious,” Allen said.
The troubles in Australia have been compounded by travails in Woolworths’ home market, where clothing and home-retail sales have declined amid weak South African consumer confidence. The stock has slumped more than 10% this month, heading for its worst monthly drop since November 2016.
At the company’s annual general meeting in November, the Woolworths board expressed full confidence in Moir. Chairman Simon Susman said at the meeting that the company had come to the end “of a very large and complex implementation program, particularly in David Jones, which now needs to start bearing fruit.”
The Australian unit’s major changes include transforming its merchandising and finance systems and online platform. Moir said at the AGM that Woolworths should have not done so much in such a short time-frame as the execution was difficult, prolonged and costly.