Investors for once liked change at the top of two companies with a track record of management uncertainty.
We saw a new CEO for struggling winer maker and exporter, Treasury Wine Estates (TWE), and a short while later, there was news that Myer (MYR) CEO Bernie Brookes was staying at the retailer and not departing in August.
Treasury shares rose nearly 3% to $3.81, while Myer shares were up 4% at $2.56 as investors bet the suggested merger with rival department store group David Jones was a goer.
TWE went offshore for its new boss and outside the wine industry.
The company appointed Michael Clarke as its new chief executive.
His most recent gig was chief executive of the UK publicly-listed Premier Foods, based in London, where he led a significant turnaround of that company.
He’s also held senior executive roles at Kraft Foods and Coca-Cola.
Mr Clarke will join Treasury Wine next month and start a handover with stand-in CEO Warwick Every-Burns.
Mr Clarke will formally start as chief executive on March 31, the last day of the third quarter of the 2013-14 financial year.
"Mike’s work on some of the world’s leading brands is second to none, and he has previously lived and worked in Australia, America, Asia and Europe; all key regions where TWE operates," Treasury Wine chairman Paul Rayner said in a statement yesterday. "In addition, he has extensive agribusiness and consumer drinks experience," he added.
The positive reception for the new CEO obscured confirmation of the financial problems at TWE in the half year to December 31, and for the rest of this financial year.
Treasury revealed a net profit of $106.2 million for the six months to December 31, 2013, up an impressive 103.1% from the profit of $52.3 million in the prior corresponding period.
But that result included a tax benefit of $80.5 million.
And removing it from the equation, earnings fell 37.6% to $45.8 million, compared to $73.4 million in the prior corresponding period.
Treasury Wine said the lower earnings reflected an increased investment in marketing and distribution, challenging conditions in Asia, and a number of factors in Australia.
Despite the woes the company will pay an unchanged interim dividend of 6c a share. The board knows it has to try and keep shareholders happy aafter 18 months of disappointing news.
The new CEO has his work cut out.
TWE 1Y – Treasury’s new CEO news overshadows the dismal results – but interim is steady
At Myer, the news Mr Brookes is staying around saw a flurry of commentaries in the afternoon and Friday morning about how the decision meant the David Jones deal was back on track and how it would prove hard to resist.
Much of that comment came from Melbourne commentators, which is where Myer is based.
"Myer’s decision to extend Bernie Brookes’ tenure as chief executive of the department store group is tightly bound up with its hope that rival David Jones will re-engage in merger talks that it walked away from in November last year," a Melbourne based Fairfax commentator wrote this morning.
The Myer board extended Mr Brookes term, reversing the decision that he would leave later this year. The new deal is open ended, meaning he could be at the retailer for quite a while.
Myer’s statement made it clear though that it still harbours dreams of the David Jones marriage.
"Myer has reached agreement with Mr Brookes to re-engage him on an ‘open term’ contract. Key terms of his re-appointment are set out at the end of this release," the release yesterday said.
"We are delighted to be able to confirm that Bernie will extend his term as CEO of Myer beyond August this year. Bernie is a world class retailer and Myer is fortunate to be able to secure his services for an extended period.
“In order to provide leadership clarity at Myer, the Board has taken the view that ceasing the CEO search at this preliminary phase and re-confirming Bernie is in the best interests of Myer and its shareholders.
“Bernie remains passionate about Myer and its future. Our five point plan is a product of his assessment of what our business needs to achieve its potential and he is committed to achieving that plan.
"In October 2013, Myer made a conditional, non-binding, indicative proposal for a potential merger of Myer and David Jones. The proposal included a process to jointly agree appointments of Chair, Board composition, the CEO and other senior management roles, head office location and corporate
"In regard to the proposal, Mr McClintock said: “While we have made clear the selection of the CEO for any future merged entity would be a shared decision by both companies, Bernie’s re-appointment provides us with at least one option for that role,” Mr McClintock said.
MYR Vs DJS 1Y – Myer reckons keeping the CEO around means the DJS merger is back on
Mr Brookes said, “I am very pleased to be able to confirm my re-commitment to the CEO role at Myer. I continue to have a passion for retail, and Myer in particular, and believe there is much I can still contribute to the business.
"Should a transaction to merge Myer and David Jones be successfully completed, I can commit to presenting myself as a potential CEO for the merged entity,” Mr Brookes said in yesterday’s statement.
And with Paul Zahra remaining at David Jones, the merger soap opera will continue. And if it happens, it is destined to fail because the problems of both department store operators is in the format and the way consumers are not spending much time or money in shopping in their stores.
Merging two under performing retailers is not a recipe for success because many consumers also like one, but not the other. The merged company will have to cut store numbers, staff, product lines and other costs, which will also undermine the rationale for joining the two.
