It’s adieu as Truworths fails to find true love
| Retailer’s French CEO-designate quits after brief fling, but Michael Mark says ‘Don’t blame me’
TRUWORTHS CEO Michael Mark says a reluctance to relinquish control of the fashion retailer he has led for 24 years is not what led to the abrupt departure of CEO-designate Jean-Christophe Garbino.
The veteran French businessman, whose appointment was announced late last year, joined the company in March and was meant to take over from Mark six months ago.
It never happened, and this week the board announced that he had resigned.
“It just didn’t work out,” says Mark.
Far from being reluctant to leave Truworths, he wanted to retire 18 months ago, he says.
The board wanted him to sign a new three-year contract, but the idea of being CEO until 65 did not appeal to him.
“I’ve been in it for 24 years and I’m still healthy enough to explore the world in a different way. I told the board and shareholders and they found a successor.
“It’s not the case, as some analysts seem to think, that I loved the business so much and couldn’t do anything else with my life and wanted to stay on.”
He only stayed on because Garbino’s appointment didn’t work out and the board asked him to change his mind. Didn’t work out? “Well, JC resigned.” Because it didn’t look like Mark was going to let go?
“Definitely not. I do not believe that is the case.”
The appointment of the CEO of chic French fashion retailer Kiabi was announced at a time when Truworths’ results were faltering, its credit-based business model was looking extremely vulnerable and analysts thought it was not doing enough to protect its market against exciting newcomers from abroad such as Cotton On, H&M and Zara.
Were there differences about strategy?
“For whatever reason, the relationship didn’t work out the way we planned it,” says Mark.
Appointments like that are not made lightly. Presumably the board did its homework and was convinced it had the right guy?
“Not presumably, definitely. He was interviewed by all the nonexecs, we did all the things that one would want to do. But life is unpredictable. Who’s to say how things are going to turn out? You try your best and things happen. That’s life.”
Did Garbino have a different view about where to take the company and how?
“All I can say is that it didn’t work out for various reasons. We all felt, including him, that it was inappropriate and perhaps there was a better way for him and a better way for us.”
He denies there was any personality clash between him and Garbino or between Garbino and the board. Clash of cultures? “Well, that I can’t answer. I don’t really know.”
It’s about leading a business “in very challenging times,” he says. “This is a hectic time for all of us.”
Was there a belief that Garbino wasn’t up to it?
“Not at all. It’s simply that he and we decided this is not the right mix of personalities, skills, whatever you want to call it, to drive us in the direction we want to go.”
So there was a personality clash?
“It wasn’t personalities. Much more to do with the fact that we as a board have a view on where our business needs to go and who needs to take it there and on what terms and what basis.”
Surely all these things should have been ironed out before appointing him?
“One would think so. But you can’t always tell. You get married and then you get divorced. You should sort everything out before and it should be very simple, but life isn’t like that.”
How could there have been a divorce when there wasn’t even a marriage?
“Call it an engagement. We were engaged for nine months and then we decided not to get married.”
Mark says leading the company in the present environment is like being in a spaceship.
“There are comets coming at you all the time, whether from government, oil price, international competition. We can’t say we do everything with absolute certainty and that we’re always right.
“We deal with things as they come along in the best manner we can, and this is just another one of them.
“We made the best choice we possibly could at the time. We were all very committed to it, we went thoroughly through it, he went thoroughly through it, and it just didn’t work out.”
Europe, of course, has had its challenges, but running a business in France is relatively uncomplicated compared with South Africa.
After shadowing Mark for the best part of a year, did Garbino feel he had underestimated the challenges?
“He might have had those thoughts. But he’s highly intelligent and worldly and had thought through it and studied it well beforehand. So I don’t think he arrived here and felt ‘This is a mountain I don’t want to, or can’t, climb.’
“But I do think that when you get into a new environment and you’re actually now faced with the reality, perhaps it feels different from what you thought it would be.
“So deep down he might have had those thoughts.”
Truworths released surprisingly good results last month for the second half of the financial year ended June, but Mark admits it has been “a hard story to sell” the past few years.
Some bad mistakes were made and the company took a knock.
“The fact is we hit a brick wall in October 2012. We were in the eye of the storm given the credit bubble burst and the fact that we were so exposed to credit.”
Some 70% of sales are on credit and they write off 10% of their loans. He admits this is high but says it’s “a strategic choice”.
“We can manage it. We have the technology to make it 6%. I can choose tomorrow to reduce the risk and accept 9% bad debt, or 8%.”
The real problem was on the merchandising front, where “we realised we’d become a little complacent in the manner in which we put our merchandise ranges together, repeating too many past bestsellers, being too predictable”.
He tried to turn things around but went the wrong way.
“As we were looking at how to deal with the credit crisis we saw all these queues in Cotton On and all these queues in Mr Price and tried quite aggressively experimenting with different product ranges that we do not normally have and cater for, that are not part of our DNA.”
In an effort to compete for the youth market they lowered their quality standards and became, he concedes, a bit too cheap, casual and grungy.
“We experimented much too aggressively with young fashion, as opposed to contemporary, youthful fashion. There’s a big difference.
“The customer gave us an unbelievably clear message.”
Truworths has 45 stores in African countries outside South Africa, including Nigeria, Ghana, Angola, Namibia, Lesotho and Botswana, and wants to grow this to at least 150 over the next three or four years.
“But it’s complicated. With Nigeria, for instance, you can’t get goods in easily, if at all, and you can’t get your money out.”
So they looked to the northern hemisphere for “a business we could relate to culture- and product-wise”.
And bought the UK high street shoe retailer Office for £256-million (about R5.9-billion today). This includes £80-million of debt that Office was carrying and will service itself, meaning Truworths will pay R3.5-billion.
The acquisition provides Truworths with a currency hedge, access to Office’s huge range of shoes and a sophisticated e-commerce platform.
Given the way things are going in South Africa, can local businesses afford not to diversify offshore, preferably somewhere like the UK, Europe or US?
Big businesses do need to have “runway” opportunities, says Mark. But not necessarily “runaway” opportunities. At least, not yet.
“We’ve got lots of runway opportunities in South Africa and Africa, and felt we had the skills and ability to make a dent in the northern hemisphere,” says Mark.
Presumably, without some Frenchman telling them how to go about it.
We experimented much too aggressively . . . The customer gave us an unbelievably clear message We were engaged for nine months and then we decided not to get married