Third David Jones CEO leaves in five years

Woolworths’s ailing Australian department chain, which has already cost it R7bn in writeoffs, will have to appoint a fourth CEO in five years, making its turnaround even more difficult.

The sudden departure of David Thomas as CEO of upmarket retailer David Jones for undefined “personal reasons”, increases the pressure on Woolworths CEO Ian Moir, who now has to run the subsidiary until a replacement is found, as well as turn around the South African clothing operation, which is struggling to compete with international players such as H&M and Cotton On.

Moir’s performance has come under intense examination, as David Jones, which was acquired in April 2014, and its South African clothing operation, have struggled.

The David Jones debacle resulted in Woolworths writing down an amount equivalent to nearly 10% of its market capitalisation on the JSE a year ago.

Woolworths’s share price has fallen nearly 24% in the past year, shaving R14.87bn off its market capitalisation. The group said at the time David Jones was

hurt by what it described as the “cyclical downturn and structural changes” affecting Australia’s retail sector. On Thursday its share price closed 3% down at R48, giving it a market capitalisation of R50.32bn.

Along with the write-down, Woolworths also acquired David Jones at a hefty 25% premium to what it was trading at on the Australian Stock Exchange at the time. The write-down, along with Woolworths “overpaying”, had placed its “management and board under intense scrutiny”, Argon equity analyst Bjorn Samuels said on Thursday.

This view was echoed by independent retail analyst Syd Vianello, who was concerned that the group’s board had to oversee the activities of a CEO who was based in Australia.

Besides growing concerns about the performance of the group’s senior leadership, Vianello was also troubled by the rapid CEO changes at David Jones. “They are losing executives so fast you can’t keep up.”

Thomas’s resignation follows the departure of Iain Nairn, who also resigned shortly after Woolworths acquired David Jones for R20bn. Nairn was replaced by John Dixon, who, in turn, left to head Woolworths’s Australian operations. Thomas was made David Jones CEO in April 2017, reporting to Dixon.

In May 2018, however, Woolworths said it was eliminating Dixon’s post and that Thomas would now report to Moir. Thomas also faced an unspecified allegation of “discrimination” two months ago.

An investigation by an external legal firm had found no evidence to support the accusation, Woolworths said.

Samuels said that while Thomas’s departure was a blow to recovery, Woolworths was unlikely to dispose of David Jones, as it had already merged some of its operations with its other Australian chain, Country Road. In August 2018, Moir said the board had not discussed selling David Jones and that efforts to turn it around were bearing fruit.

The department chain reported a 1% increase in sales for the 26 weeks to December 23. It reported a 50% slump in operating profit in 2018. Woolworths is scheduled to publish its half-year results in February.

25% the premium to what David Jones was trading at the time on the Australian Stock Exchange that Woolworths paid for