Woolworths: Another blow for retailer, Down Under
Group loses head of its Australian operation and chief executive of battling David Jones department store chain
WOOLWORTHS yesterday announced the resignation of its Australian head and David Jones (DJ) chief executive David Thomas as the group continued to battle a difficult market where household budgets have remained under pressure because of high levels of indebtedness and weak income growth.
The JSE and Australian-listed group cited personal reasons for Thomas’s abrupt resignation after only 18 months at the helm.
“A replacement for DJ will be announced in due course and WHL Group Ian Moir will work directly with the DJ management team in the interim,” said the group.
Thomas is the third DJ chief executive to quit since Woolworths, valued at R50 billion, took over the Australian department store in 2014.
Iain Nairn resigned in 2015 after 14 months on the job, and also citing personal reasons.
He was replaced by John Dixon in 2017 before his role was made redundant after a restructure.
Damon Buss, an equity analyst at Cape Town-based Electus Fund Managers, said the resignation was a shock since the group had lost three chief executives in four years.
“Instability of this level in an executive team is concerning and indicates that the recent slowdown in DJ could have got significantly worse.
“And therefore the turnaround of DJ will be delayed further,” Buss said.
Thomas was previously DJ’s chief operating officer as well the chief operating officer at Country Road, also owned by Woolworths.
Ron Klipin, a portfolio manager at the Joburg-based Cratos Wealth, said the resignation was not surprising given the problems facing DJ.
Klipin said Australia was a different market to South Africa and initiatives to turn DJ around had failed.
“DJ is trying to change the business model, but it is a big ship it takes time to turn around.
“The department store model has not worked at Edcon, Stuttaford, and is under pressure in the US and in the UK.
“It seems that DJ is going to be a noose around Woolworths’ neck,” said Klipin.
DJ impaired R6.9 billion last year, resulting in Woolworths swinging into a loss of R3.5bn for the financial year from a profit of R5.4bn in the prior year.
The store has grappled with high overheads and outdated systems for a modern business. Woolworths shifted its focus on reining in costs and closing unprofitable spaces in a bid to improve trading densities.
It also introduced numerous transformational strategies to drive profitability and integrate DJ in Australia, with the roll-out of foods, still a major challenge in the highly competitive market.
Klipin said the DJ-branded merchandise was not selling well in South African stores. Woolworths shares declined 2.93 percent on the JSE yesterday to close at R48.