A year ago it was the Masters hardware adventure and concerns about management performance that dominated the annual meeting of Woolworths (WOW). The running sore that was Big W was a minor item of angst for most shareholders.
12 months on and Big W is the concern dejour for Woolies shareholders who are fretting about similar issues – poor performance and the appearance of confused management.
And it was Woolworths chairman Gordon Cairns who tried to assure shareholders at yesterday’s AGM in Sydney that Big W was front and centre for the board and management and that any decisions on the business will be made in their best interest.
Cairns acknowledged the surprise resignation of Sally Macdonald as Big W’s chief executive last week after less than a year in the job.
"The board is disappointed with the performance of Big W, and, while acknowledging that the discount department store market in Australia is a challenging one right now, wants to reassure all shareholders that we are focused on making decisions for Big W that will enhance shareholder value in the long term," Cairns said.
Cairns said that while Woolworths results in 2016 results were disappointing, "this has been a year of significant progress on our transformation journey. There is much to do, and we remain determined," he said.
And Woolies CEO, Brad Banducci made similar remarks to the AGM, emphasising that the company was focused on what is best for the long-term success of Big W.
"You will know that in our first quarter results, we noted that BIG W was at the start of a multi-year turnaround, and we will continue to refine and build on that transformation agenda," he said.
Mr Banducci told shareholders that Ms Macdonald’s resignation was unfortunate and praised the progress she had made during her short time with the company.
"Sally made material progress in restructuring the business in many areas, including direct sourcing of product, which is essential in discount department stores given the razor thin margins you have to operate on," he said.
"We plan to maintain our focus on this transformation."
Mr Banducci said Ms Macdonald had also made headway in product development, putting the fashion back into the range, simplifying the business and reducing costs.
Big W’s sales have been in decline, falling 5.5% to $880 million during the first quarter of the 2017 financial year, compared to a year ago.
Woolworths booked about $460 million in asset write downs related to Big W and Ezibuy, the group’s online retailer, when it reported a $1.235 billion annual loss in August (Most related to the big write downs in the hardware business.
And Woolies still has a supermarkets (especially food and petrol) operation to run which is its core business.
Mr Banducci was at pains to talk about that as well as Big W. Sales were steady in the year to June and the fall in profit margins and drop in earnings was the real ‘crime’ so far as many shareholders were concerned. Woolies heartland has always been its supermarkets and food in particular.
He said customers were recognising the work done to reduce prices and improve the fresh food offering as well as the overall store appearance at Woolies supermarkets.
"Ten months ago, as a management team, we faced a company whose financial and operating performance was deteriorating, whose market share was declining and, most importantly, a company where many of our customers had lost their trust in us," Mr Banducci said.
"Our core Australian supermarket business had stopped growing, we had a business in Masters that we had to close down and a third business – Big W, that we needed to radically transform to take account of fundamental changes in the discount department store sector.
"I’m pleased to say that over the past ten months, because of many large and small decisions, we have made a significant amount of progress. Clearly we still have a long way to go but it is very pleasing to now be underway."
Shares in Woolworths were up 0.4% at the close yesterday at $23.50.
