Wool­worths’ share price jumps 10% af­ter Moir re­signs

Pretoria News - - BUSINESS REPORT - DI­NEO FAKU di­neo.faku@inl.co.za

WOOL­WORTHS’ share price leapt nearly 10 per­cent yes­ter­day as the mar­ket wel­comed the res­ig­na­tion of chief ex­ec­u­tive Ian Moir, while the fail­ure of the re­tailer’s David Jones ac­qui­si­tion con­tin­ues to haunt the com­pany.

Wool­worths jumped 9.6 per­cent at 12.04pm to R52.83 a share, as the mar­ket cel­e­brated “fresh blood” at the helm af­ter Moir’s nearly decade-long ten­ure.

The share closed 8.30 per­cent higher at R52.20 on the JSE yes­ter­day.

The group said Moir would be re­placed by South Africa’s Roy Bagattini, 56, the pres­i­dent of global ap­parel brand Levi Strauss & Com­pany Amer­i­cas, who has a track record in merg­ers and ac­qui­si­tions.

Woolies said Moir would be act­ing chief ex­ec­u­tive of David Jones, the Aus­tralian brand that the com­pany ac­quired in 2014, in­tend­ing to ex­pand its foot­print by cre­at­ing a South­ern Hemi­sphere re­tail gi­ant but which had dis­ap­pointed.

“To fa­cil­i­tate a smooth tran­si­tion, Ian will be work­ing closely with Roy and he will also con­tinue in his role as act­ing chief ex­ec­u­tive of David Jones,” the com­pany said.

Moir has come un­der pres­sure due to the David Jones ac­qui­si­tion as var­i­ous strate­gies to turn Wool­worths around had thus far failed, and the group was try­ing to change the busi­ness model.

Wool­worths chair­per­son Hu­bert Brody said un­der Bagattini’s lead­er­ship man­age­ment would con­tinue to drive the group’s fu­ture strat­egy.

“Roy has ex­ten­sive op­er­a­tional, man­age­ment and turn­around ex­pe­ri­ence in global con­sumer and re­tail mar­kets, which will prove in­valu­able as we con­tinue to nav­i­gate the struc­tural changes tak­ing place in the re­tail sec­tor and the chal­lenges par­tic­u­lar to our group,” Brody said.

Michael Tre­herne, a port­fo­lio man­ager at Ves­tact As­set Man­age­ment, said with the fail­ure of the David Jones ac­qui­si­tion and sev­eral se­nior man­agers re­sign­ing, the mar­ket started to feel that fresh blood was needed at the top.

“Ian Moir has also been in the chief ex­ec­u­tive job for just more than nine years. There is an ar­gu­ment to be made that it is healthy to have some ro­ta­tion at the top,” said Tre­herne.

Tre­herne said the Moir legacy, un­for­tu­nately, would al­ways be re­mem­bered for the poor ac­qui­si­tion of David Jones.

“In my view, his big­gest con­tri­bu­tion to Woolies was the de­vel­op­ment of their food di­vi­sion.

“As it stands, it is the best part of the busi­ness,” Tre­herne said.

Wool­worths in Au­gust re­quested Moir to fix the David Jones brand by spend­ing sig­nif­i­cantly more time in Aus­tralia to over­see its turn­around in the role of act­ing chief ex­ec­u­tive of the brand, which im­paired A$437.4 mil­lion (R4.34 bil­lion) dur­ing the year to June 2019.

Lu­lama Qongqo, an in­vest­ment an­a­lyst at Mer­gence In­vest­ment Man­agers, said Moir’s step­ping down as group chief ex­ec­u­tive was much needed.

“The poor cap­i­tal al­lo­ca­tion de­ci­sion to buy David Jones, that eroded share­holder value, came af­ter his ap­point­ment – his over­in­flated re­mu­ner­a­tion sug­gests oth­er­wise.

“I be­lieve Ian Moir is in de­nial about the struc­tural changes that are hap­pen­ing in the global depart­ment-store land­scape, and he might per­haps be suf­fer­ing from the Dun­ning-Kruger ef­fect – there are some struc­tural changes that even the most as­tute man­age­ment can­not avoid,” said Qongqo.

In psy­chol­ogy, the Dun­ning-Kruger ef­fect is a cog­ni­tive bias in which peo­ple as­sess their cog­ni­tive abil­ity as greater than it is.

How­ever, Qongqo’s main con­cern about Moir’s res­ig­na­tion was that he was still a part of the group and con­tin­ued to be the act­ing chief ex­ec­u­tive of David Jones.

She be­lieved it was more pos­i­tive that Bagattini’s wealth of knowl­edge and ex­pe­ri­ence was likely to ben­e­fit the group and its share­hold­ers.

“The mar­ket has spo­ken through to­day’s share price move,” Qongqo said.

Roy Bagattini

Ian Moir

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