Coles Group’s fierce price cutting counter attack in the past year seems to have resulted in Woolworths’ CEO Michael Luscombe retiring.
The news, which didn’t come as a surprise to the market with the change tipped in two media reports yesterday, was conveyed in a statement to the ASX.
Mr Lucombe will retire at the end of September after five years as CEO and will be replaced by Grant O’Brien, a man unknown to the market who has been Woolies chief operating officer for food and petrol.
The company’s shares rose after the news, hitting a day’s high of $27.32, before retracing to end down 19c at $26.95.
Woolies shares are down from around $30 last October when investors were ignoring signs of slowing spending by consumers.
Then a Reserve Bank rate rise in November further cut spending impacting most of the industry, but not Coles’ supermarkets business which continued to outperform the larger Woolies business.
Coles’ Kmart and Target department stores have found it tough, but they have also outperformed Woolies Big W chain.
Mr Luscombe sparked talk he was preparing to depart after he said "all of us will retire at some time" during a newspaper interview in early February, which came soon after the retailer halved its 2011 profit growth estimate to 5% to 8% from as much as 11%.
Woolies sales growth has slowed while Coles’ has accelerated during the current sluggish conditions for all retailers.
In yesterday’s statement, Woolies said 49 year old Grant O’Brien, would become the deputy chief executive and CEO designate.
He will join the board as an executive director and will work closely with Mr Luscombe until his formal commencement date on 1 October, the fifth anniversary of Mr Luscombe’s appointment as CEO, Woolworths said.
Mr O’Brien has worked 24 years at Woolworths and the company says he had broad experience working across diverse areas of the business.
Chairman James Strong said, “We congratulate Grant on his appointment. He will be a highly capable successor to Michael and is extremely well regarded at all levels of the company, and known for his tremendous energy and determination.
"His depth and diversity of experience and strong strategic acumen has given him solid grounding to lead Woolworths into its next phase of growth.”
Mr O’Brien said, “I am immensely honoured to receive this opportunity and would like to thank the Woolworths board for having confidence in my ability to continue Michael’s legacy.
"I see myself as being very much an example of everything Woolworths stands for today in terms of having a strong supermarket grounding but with a diversity of experience across our broader portfolio of businesses.”
Mr O’Brien has been Woolies head of strategy and in that position he drove the hardware joint venture with Lowes of the US which is aimed at taking on Bunnings (part of Wesfarmers).
The first store opens later this year and the cost will be more than $1.5 billion over five years to Woolies alone.
Mr O’Brien’s performance will be judged by the progress of the hardware move and by what the rest of Woolies does under his leadership.
He is not such a hands on retailer as Greg Foran is (Mr O’Brien’s former boss in supermarkets). That could tell as the Coles price cutting battle continues to drive Woolies rather than Woolies leading Coles in the two company battle.
Mr Strong thanked outgoing Mr Luscombe for his service, saying that during his tenure as CEO, Mr Luscombe has achieved a tripling in group EBIT, driven annual sales through $50 billion, and overseen a 68% increase in shareholder returns.
“The board is deeply appreciative of the outstanding leadership Michael has provided Woolworths Limited, particular as CEO. His 33 years of service with the company have been nothing short of exemplary,” Mr Strong said.
No mention of the Coles’ counter attack of course, or the fact that Coles supermarkets business has outperformed Woolies in the past year.
Or the fact that Coles’ CEO Ian McLeod has given his company the public image of being a price cutter through market leading strategies involving deep price cuts on products like bread, milk and now chicken, plus its Down, down, down campaign.
