As an investor you know what embarrassment is? It’s a big loss, or a missed opportunity. For shareholders its similar, but overlaying that is the performance of management and boards of the companies you invest in – strategy and execution are always the big tests for dud managements or good performers.
And in the past decade the biggest disappointment has been Woolworths. From an outperformer, to an also run. Masters Hardware, losing control of its market dominant position in supermarkets as Coles and Aldi stole their lunch and dinner, weaknesses in its Big W chain of mid level department stores as rival Kmart boomed.
And while the newish management has rightsizing the company, especially in supermarkets, and wondering what to do with Big W by selling off assets or closing them (selling the petrol retailing operations to BP, shutting the hardware disaster) and this week, finally closing the door on an Australian adventure that cost well over $A300 million.
That’s an embarrassment – when a big company like Woolworths buys an asset like Kiwi online retailer, Ezibuy for $A318 million, (or $NZ350 million) writes down the value by $A309 million (to $A30 million) and then sells it to a private equity company for an undisclosed amount.
That is a shocker – this week after four years a business had neglected by dud management to the point where it was worthless. Woolies bought EZiBuy from private equity group, Catalyst, Now it has been sold to Sydney based Alceon group which is a shareholder in the Noni B womenswear chain.
For Woolies there is no financial pain – that was taken in mid 2016 when current CEO, Brad Banducci and chair, Gordon Cairns rounded up all the remaining duds (such as the company’s hardware adventure, Masters), wrote them off, or wrote down the value or put them up for sale. Home Hardware and Timber was in the same boat – it was sold to Metcash.
Besides Noni B, Alceon owns Pretty Girl Fashion group, having bought that from James Packer’s Cons Press, and Ezibuy sells quite a few clothing and associated items online.
EziBuy was founded by Peter and Gerard Gillespie in 1978 and had morphed into Australasia’s largest fashion and homeware store, selling about $A180 million worth of products every year. Woolies idea was to sit EziBuy in the group that also houses Big W, Woolies now struggling department store chain, but that didn’t work.
Certainly so far as the market is concerned, EziBuy and the decision to sell it is another time – when the sale decision was announced, on July 25, 2016, Woolies shares were wallowing at $A22.42 – yesterday they were more than $A3 a share high at $A25.57 – up more than 13%.
But when Woolies bought EziBuy in September 2013, the shares were above $A29, so the loss in value of around 12% for shareholders is less than thrilling, and embarrassing, just like the near four year life of EziBuy with Woolies.
And the sale was good timing for Woolies because it removes a business many analysts thought will be an early victim of Amazon after it starts here later this year – which is seen as a positive move by the market.
