Woolies clears decks after profit downturn
WOOLWORTHS is jettisoning its senior leadership team as Australia’s largest retailer tries to recover ground lost to its supermarket rivals.
With chief executive Grant O’Brien already on the way out, chairman Ralph Waters has now announced he is stepping down after the once market-leading supermarket giant suffered a 12.5 per cent slide in its full year profit to $2.15 billion.
“If the company disappoints the market in any way, there are two people who carry the responsibility: the CEO and the chairman,” Mr Waters said. “I’ve put my hand up.” The shrinking bottom line came as supermarket sales went backwards, profit at discount retailer Big W shrunk by a quarter and losses blew out at Masters.
The most pressing task for his replacement, Origin Energy chairman Gordon Cairns (pictured), is appointing a new chief executive to help lead Woolworths against fierce competition from the likes of arch rival Coles and German retailer Aldi in the increasingly crowded supermarket sector.
Woolworths is still a goliath, holding an almost 42 per cent market share, according to research by analysts at IBISWorld. But Aldi has come from nowhere a decade ago to grab 8.2 per cent of the market .
Sales at Woolworth’s core food and liquor division rose 2.3 per cent for the year to $41.1 billion while comparable sales were up a thin 0.7 per cent. Worryingly, sales fell by 0.9 per cent in the three months to June 28 despite Woolworths rolling out a turnaround strategy under new supermarkets boss Brad Banducci.
By comparison, Coles recorded a 5.3 per cent rise in food and liquor sales and a 3.9 per cent increase in comparable sales during the 2015 financial year.
Woolworths has also come under criticism for pouring billions into Masters which continues to be pummelled by Wesfarmers’ Bunnings. Losses at Masters surged 40 per cent to $245.6 million on full-year sales of $930 million. Last week Bunnings reported a record $1.1 billion profit haul.
Mr Waters, who took over as chairman after the Masters roll out, said he believed it would eventually thrive, adding corporate Australia was often criticised for not investing in new projects.
“This is a case where the board did have the courage and it gets beaten up for showing that courage every day,” he said.
IG market analyst Angus Nicholson said while the top level shake out was positive Woolworths still had a lot of work to do to convince investors it could regain its mojo.
“There are problems across the board with the company.,” he said.
Woolworths shares closed up 35 , at $27.40. It will pay a fully-franked 72 a share final dividend.