By any measure the 0.2% fall in the Woolworths share price yesterday in the wake of the loss of the second CEO of its struggling Big W department store chain in a year, was a pretty muted reaction. The shares finished the day at $23.30.
Sally Macdonald, who was appointed CEO in January, announced her resignation on yesterday morning. he decision to quit so soon after taking the job raises the question whether Big W’s problems are intractable and that the chain might be best placed in the hands of a new owner. Certainly Woolies management has been distracted for much of the last three years by the ongoing problems in its loss-making hardware business, especially the Masters chain which ended up forcing change at board and senior management level and more than $3 billion in losses.
Senior managers and the board clearly didn’t have enough time to concentrate more fully on Big W’s problems.
It seems that interest has stepped up in recent months in the wake of the tough decisions to pull the plug on the costly hardware adventure and the changes at board and senior management levels, including new CEO, Brad Banducci.
Could it be that with yesterday’s announcement we have seen the outcome of that stepped up level of interest about fixing Big W’s problems. Certainly news of a three to five years timeframe for a fix was a surprise.
Macdonald, who was after rescuing the smaller upmarket retail brand Oroton.
And while there were great hopes she could revive Big W, it’s confused sales offer to customers (is it a fashion business a mid-level department store, or a clone of Wal Mart as Woolies original envisaged it and based much of its planning and store design to replicate)
She replaced Alistair McGeorge who lasted little more than a year, with Woolies citing health reasons for his departure.
Woolworths CEO Brad Banducci said Ms Macdonald had made "material progress" in restructuring Big W, however, it was "apparent that the transformation… will take three to five years to complete and, unfortunately, this time horizon is inconsistent with Sally’s expectation when she joined".
David Walker, who has led Woolworths’s now-scrapped home improvement business including the failed Masters joint venture since February, will become Big W’s acting CEO.
Woolies said Ms Macdonald will support Mr Walker during the transition.
Big W has struggled to compete with Wesfarmer’s kmart and Target and international fast fashion retailers. Comparable store sales fell 5.7% in the first quarter, better than the 8.0% slide recorded in the first quarter of 2015-16.
That followed a full-year loss in 2015-16 of $15 million and Woolworths said in its first quarter sales report that the 2016-17 year should see a similar sized loss from Big W.
In that report Woolies had this to say about Big W’s performance (it wasn’t very upbeat):
"Comparable sales were impacted by significant SKU reduction and clearance activities in deleted lines as well as a reduction in the number of unprofitable promotions. Toys, Books and Audio Visual outperformed despite changed timing of the toy sale compared to last year. Apparel was markedly softer than expected, compounded by the cold start to spring.
"Looking forward, we expect modest improvement in apparel sales in the second half as we transition to directly sourced and designed product. However, this is unlikely to offset the deflation and strategic clearance activity that will continue throughout FY17, impacting sales momentum and margins. As a result, we do not currently anticipate an improvement in FY17 EBIT compared to FY16.
"Whilst it is still early in our multi-year turnaround we have made solid progress in driving our strategic plan. This includes launching our own online site in the quarter, clearing excess inventory and reducing the complexity of our offer. We remain committed to our clear value positioning which we believe remains a long term competitive advantage.
“At the end of the quarter we had 186 BIG W stores, unchanged from year end."
