Moir sees no change in DNA as businesses are spliced

WOOLWORTHS CEO Ian Moir sits in a sunny office on the sixth floor of a building steeped in the group’s history, and nearby a team of “among the best people from Woolworths and Country Road” is working fervently on integration and taking the deal forward.

One of Moir’s main responsibilities is to ensure the three parts – David Jones, Woolworths and Country Road – come together seamlessly and efficiencies are maximised.

He does not believe the integration will affect Woolworths’s DNA. “We have carefully chosen our acquisitions in entities that have similar cultures.”

Moir says this makes it a lot easier to bring the businesses together as they have similar relationships with suppliers and place customers at the helm.

One of the targets is to increase private label revenue from 4% to 20% of sales over five years at David Jones, so Woolworths will send in-house apparel brands such as Country Road, Trenery, Mimco, Witchery, Studio W and Re into the Australian department store chain.

David Jones has upmarket food halls at three of its 38 stores, which contribute only about 0.1% of that business. South Africans won’t be seeing its food, which Moir says is remarkably similar to Woolworths lines “but our food is better”. The food offering “is way down on our agenda, and it’s not an issue”.

A priority is to derive benefits from economies of scale – as a much bigger business, the cost of goods will come down, selling prices will be reduced and market share will increase.

The deal will be earnings dilutive for the first year, neutral in year two and earnings accretive thereafter.

“Our aim would be to improve on that,” says Moir, who had to delay a back operation while he met top shareholders in Cape Town, Johannesburg, London, Boston and New York to explain the rationale for the deal.

He had to have the operation done just over three weeks ago, and will split his time equally between Australia and South Africa over the next 18 months. He’s not concerned, and says the team around him is very capable.

The share price has risen more than 10% since the day before the deal was announced, giving it a market cap of R62-billion. With David Jones, it should go to R80-billion plus in time.

Bloomberg reports the share price had its biggest fall in three months after a trading update this week as annual sales growth slowed and baddebt charges rose. However, profit margins and market share rose.