Struggling Woolworths shares fall after two more directors leave
Struggling retailer Woolworths saw its share price decline to the lowest level since 2012 after saying two nonexecutive board members with extensive business experience in Australia resigned with immediate effect on Monday.
The resignation of two Australia finance experts, Patrick Allaway and Gail Kelly, the South African-born former CEO of Westpac bank, followed that of David Jones CEO David Thomas, who left with immediate effect last week.
Thomas was the third CEO to leave David Jones in five years.
Woolworths bought David Jones in a much-praised takeover for R21bn in April 2014 as part of its strategy to create the largest retailer in the southern hemisphere.
Battling to turn around the business, the retailer wrote down the value of the Australian retailer by R7bn in 2018, leading Woolworths to report its first annual loss since 2002.
The share price is down 28.8% over the past year, lagging both the JSE’s general retailers and all share indices.
It closed down 3.29% on Monday at R45.80, a far cry from its post-David Jones acquisition peak of R106.88 in 2015.
The resignations of Kelly and Allaway come just a few months after both stood for re-election as Woolworths board members at its annual general meeting in (AGM) November, with Kelly gaining 91.72% and Allaway 91.79% shareholder support.
They were also directors of David Jones, with Allaway chairing the Australian chain’s audit, risk and remuneration committees. They gave no reason for their departures, while Woolworths said it did not comment on "board deliberations".
Independent retail analyst Syd Vianello said it was very troubling that three high ranking people in the group had left without giving explanations for their departures.
"The sudden departures of three directors with Australian roots was enough for me to believe that it has to do with David Jones," said Gryphon research analyst and portfolio manager Casparus Treurnicht.
He said he initially did not think Woolworths would consider selling David Jones, especially since it overpaid for it, but now such a move looked increasingly likely.
The rapid departure of senior leadership after it became apparent that the acquisition was not working out, was usually a sign that the company was about to go through a major restructuring or even see it sold off. They opted to leave because they did not agree with the new direction for the company, Treurnicht said.
Woolworths said at the November AGM that disposing of the group was not on the cards and that it was committed to turning it around.
At the time, long-serving chair Simon Susman also expressed full confidence in CEO Ian Moir.
The company said on Monday that it had the skills
to run and oversee its Australian operations. "The board has significant complementary expertise across many international markets.
"Ian Moir also has a deep Australian retail experience. We are in the process of succession planning and will appoint new directors based on specific experience in relevant markets."
Kelly, a former Nedbank employee who went on to become CEO of Australia’s St George Bank from 2002 to 2007 and then headed the larger Westpac banking group from 2008 to 2015, joined Woolworths as a director in 2015.
Allaway joined the Woolworths board in 2014.