Woolworths chief executive Grant O’Brien has hit the ground running in the first week or so of his reign.
Yesterday he announced plans to boost higher profit own brand products, suggested that the Dick Smith chain of electronics stores might be sold and revealed a top to bottom review of its most important division, its huge supermarkets business which dominates Australian and NZ retailing.
The moves are aimed at finding a way to arrest the slowdown in sales and earnings growth which has appeared in the past year.
They were revealed at an investor day held yesterday at which Mr O’Brien outlined a series of moves to try and re-invigorate the retail giant.
The changes suggested by the new CEO effectively question the structure that Woolies erected under previous CEOs Roger Corbett and his successor Michael Luscombe, who retired last month and was replaced by Mr O’Brien.
Mr Corbett bought Dick Smith and moved into NZ and Mr Luscombe continued this approach.
Mr O’Brien said in his opening address yesterday, "Many parts of our business are performing very well with solid momentum, areas like Fresh Food, Liquor, Countdown in New Zealand, Hotels, and Home Improvement."
"Others areas are not accelerating quickly enough for my liking and they need a new focus. I am committed to realising success in all of our businesses, and making a strong company even stronger."
There’s a lot of potential "bad news" in the reviews which could mean store closings, sales and job losses, so to soften that possibility Woolies announced some ‘good news’ yesterday.
"Woolworths Limited has today announced it will create more than 10,000 new retail jobs in Australian & New Zealand during the current financial year as it recruits staff to work in new stores. The new jobs represent an increase of more than 100% over last year, driven by a significant spike in the number of new store openings.
"During the year, the company will open a record 39 new supermarkets, seven BIG Ws and 15 Masters Home Improvement stores, each of which will employ in excess of 130 people.
"A new distribution centre in Western Sydney will employ a further 350 people. In total, the group will grow its total number of stores by 117, compared to 73 in financial year 2011."
So the reality is that there is no new employment in the new store openings in this announcement apart from those already committed to by the company previously.
The real meat is in the review of supermarkets by its new head of supermarkets and petrol, Mr Tjeerd Jegen, who was only appointed a few months ago and replaced Greg Foran, who departed after losing out to Mr O’Brien for the CEO’s role.
Woolies said the wholesale review of its supermarkets business, if successful, would add $2.5 billion a year in incremental sales for the group.
He also has a new title, as Woolies explained yesterday:
"Led by the new Director of Australia Supermarkets, Tjeerd Jegen, the review will centre on reinvigorating one of Australia’s most recognisable and valuable brands, and extending an unswerving and proactive focus on the customer."
"Mr Jegen said: “My observations are that our customer communications over the last couple of years have been somewhat inconsistent and lacking in clarity. We have an incredibly strong brand with a proud Australian heritage and we need to make sure it is achieving its full potential."
He has only been in Australia since August.
Woolies also said its Dick Smith electronics chain will be reviewed and a sale of the poor performing business is now a possibility. If sold that would mean getting rid of the company that had static sales of $1.6 billion in the year to June, and whose earnings before interest and tax fell 27% to $22 million in the June 30 year.
Logical buyers would include Harvey Norman and JB Hi-Fi, although interest from private equity shouldn’t be underestimated.
Mr O’Brien said he also wanted to re-establish Woolworths’ marketing supremacy around value and growth.
To cap it all off, the company will also focus on rebuilding momentum at its Big W merchandise chain.
But that has a lot to do with the reluctance of consumers to spend more on products like clothing and footwear, plus consumer electronics, all goods that have proved hard to shift for rivals such as Harvey Norman, Target and Kmart. Even JB Hi-Fi has battled falling same store sales in recent months as consumers cut their purchases.
Mr O’Brien said Woolworths must also improve its liquor business (getting rid of BWS and re-badging everything Dan Murphy’s might be a start,) while newly appointed executive Penny Winn will work on a suite of iPhone applications and other online tools to drive customer traffic.
That seems to be the aim with the company talking about taking the Dan Murphy’s big-box store format as well as its bottle shops located near or inside its supermarkets.
Woolworths says its aiming to grow its Dan Murphy’s network to 208 outlets by 2016 as well as roll out a new Dan Murphy’s format model. It will al
