HUBRIS AND GREED

Analysts are perplexed at CEO Ian Moir’s upbeat energy in the face of what may be nothing less than an existential crisis for Woolworths. There is the very real risk that it could destroy his reputation as well as that of the company. Moir refuses to acce

The board must decide whether David Jones is a lemon and sell it, or persevere and preserve it

Ian Moir, CEO of Woolworths, is jaw-droppingly energetic. Analysts got another demonstration of the now-familiar energy and optimism that has characterised Moir’s 21 years with Woolworths (he has been CEO for nine of those) at last week’s half-year results presentation, as he lightly reeled off the challenges facing the group, as well as the many signs they were now on the right track.

“Our clothing business is coming back … we’re doing the right thing, taking the right approach; the new executives understand the market,” he said.

As for Australia, where the market is “really tough”, Moir told analysts: “David Jones performed well, right up to the end of November.” He enthusiastically reminded everyone present that “we’re building a business that’s future-fit”.

It was all chillingly reminiscent of comments he made after dire results in September 2017: “… we can fix this, we can get it right and we can get back to what we said we were going to deliver ... ”

With Moir’s default setting at “upbeat”, he even manages to make cutting a dividend sound like a rollicking good idea. “We’re stopping the dividend flow from Australia over the next couple of years so we can reduce the debt in Australia.”

That would be the sort of message delivered with trepidation by many CEOS; but the Scottish-born Moir has a way of making it sound like part of an exciting growth plan.

At times during Moir’s presentation, it was easy to forget that Woolworths, which was founded by Max Sonnenberg in 1931 in Cape Town and now operates in 14 countries, is a retailer facing an existential crisis.

The reality is the Australian business, consisting of David Jones and Country Road, which contributes nearly half the group’s total operating profit, is in precarious territory. At stake are not just huge whacks of shareholder value and Moir’s reputation, but also the legacy of the chair, Simon Susman.

Susman, who has been with the group 37 years and is due to retire from the board in November, runs the risk of being remembered for backing the controversial Australian acquisition that cost so much money and not for building a world-class retail brand with exceptional values.

What it means:

That deal, which risks unravelling all that Woolworths has built in recent decades, was announced in April 2014.

Moir said that Woolworths would pay R21.4bn to buy David Jones (or DJS), one of Australia’s most prominent department stores. It had 38 branches and sold everything from wine to gourmet food, clothing