Woolworths has appointed a top executive from US fashion group Levi Strauss to replace group CEO Ian Moir, whose reign has been overshadowed by the retailer’s disastrous foray into Australia.
Analysts said Moir’s departure on Tuesday after more than nine years at the helm was unsurprising given the performance of the retailer’s David Jones department store chain in Australia, which has seen its value written down to less than half what Woolworths paid for it.
The news sent Woolworths’ share price soaring 8.3% higher to close at R52.20, its biggest one-day gain in more than six years. The shares are now trading at just less than half of a record high of R108 reached in November 2015.
The latter years of Moir’s time at the retailer was dominated by investor dissatisfaction over the group’s investment in Australia through David Jones, which Woolworths paid about R21bn for in 2014. Its valuation stood at about R9.6bn at the end of June.
Moir, who was made CEO in November 2010, will be replaced by South African Roy Bagattini, currently executive vice-president and president for Levi Strauss Americas. Bagattini has held executive roles at SABMiller internationally and in SA.
“Market participants may feel that Mr Bagattini may be more open-minded in terms of considering the group’s options with David Jones, because he’s not as close to the acquisition as Moir was,” said Sasfin Wealth senior equity analyst Alec Abraham.
Woolworths, like other JSE-listed retailers, had probably already been aggressively reviewing its store estate and expansion plans in response to ongoing, almost non-existent volume growth in the SA market, as well as consumers getting poorer over multiple years, and the effect of online retailing, Abraham said.
Gryphon Asset Management analyst Casparus Treurnicht said, however, it is unfair to put the blame on Moir as the David Jones acquisition had been fully backed by the board and shareholders at the time. Management will now likely be “laser focused” on areas it can control and reclaim market share, said Treurnicht, adding that fashion has been a weak spot for Woolworths in recent years.
Woolworths said on Tuesday that in addition to leading numerous merger and acquisition projects during the course of his career, Bagattini has spearheaded the turnaround of several companies and successfully driven their growth and expansion,
“Roy has extensive operational, management and turnaround experience in global consumer and retail markets, which will prove invaluable as we continue to navigate the structural changes taking place in the retail sector and the challenges particular to our group,” Woolworths chair Hubert Brody said.
Excluding David Jones, the Woolworths group performed well under Moir, Argon Asset Management equity analyst Bjorn Samuels said. The David Jones acquisition had shifted management focus away from the group’s core SA business, he said, “causing Woolworths to score some own-goals in the latter part of his decade long tenure”.
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