FIRST LOSS SINCE LISTING
Woolworths looking for new CEO, but Moir staying put for now
Woolworths CEO Ian Moir, who oversaw the group’s disastrous foray into Australia that has contributed to its share price halving over the past three years, is going nowhere — for now.
Following the release of its results for 2018, in which Woolworths reported its first loss since listing on the JSE in 1997, Moir told Business Day that the board believes he is the "right guy" to fix the problems that have dogged the group’s performance.
"They recently extended my contract, but performance has to come with that," he said.
Moir, who was appointed CEO in 2010, would not disclose for how long his contract was extended. He said the board was in the process of looking at who could replace him and when the appropriate time would be.
"They have made it very clear they want me to commit to getting David Jones right," said Moir, referring to the struggling Australian department store chain that Woolworths bought for R21.5bn in 2014 — a transaction partly funded by selling new shares of nearly R10bn.
That deal was aimed at transforming Woolworths, which has had much success in SA targeting higher-end customers with its fashion and food offering, into a southern hemisphere retail powerhouse. It helped to drive the company’s share price to its all-time high of R106.88 in November 2015.
However, the stock’s performance has since significantly lagged the JSE’s all share index as well as the general retailers index. The stock closed down 1.84% at R50.60 on Thursday, near its lowest level since 2012.
The share price was hammered after Woolies reported a loss of R3.5bn in 2018, from a profit of R5.4bn in financial 2017, and cut its dividend by nearly a quarter to R2.39 a share.
The results were mainly affected by the hefty R7bn write-off on the value of David Jones.
Moir said the board had not discussed selling David Jones and that efforts to turn around the department chain, which reported a 50% slump in operating profit in 2018, were bearing fruit.
"We overpaid for it and arguably we bought it at the wrong time, but now would not be a good time to sell, so we wouldn’t consider it," Moir said.
The board was seeing some improvement, he added. "It’s about creating a great offering and a great business."
Sasfin’s Alec Abraham said the Australian economy was struggling and David Jones was in the midst of such a far-reaching transition exercise, that "it’s difficult to imagine who would want to buy it, particularly having not been architects of the transition".
He said it would also be a mistake to remove Moir at this stage given all the remedial action he was trying to implement across the group.
Apart from a sparkling performance from Woolworths Food, which raised its contribution to operating profit 9.6% and Country Road’s 4.6% increase, there was little in Australia or SA to lift investor spirits.
Woolworths’ core fashion, beauty and home division suffered a 1.5% fall in sales and an unprecedented 21% drop in operating profit.
"We got women’s clothing wrong, we went too young and too fashionable," Moir said.
Merchandising had become more disciplined with a return to more of the well-priced basic products customers expect from Woolies, he said.
Abraham said while it was encouraging to hear management take responsibility for the merchandising errors, it was puzzling that it had taken so long. "The mistakes were evident more than 18 months ago."