Woolworths Ltd Puts Faith In New CEO Amid First Loss Since 1993
Woolworths Ltd., Australia’s largest supermarket chain, appointed Brad Banducci as its new chief executive officer to turn around the company’s fortunes after posting its first loss since listing in 1993.
Banducci, managing director of Woolworths’s food group since February last year, will replace Grant O’Brien who said in June he’d quit after less than four years at the helm, the Sydney-based company said in a regulatory statement Friday. Under O’Brien, Woolworths made the now disastrous foray into the hardware market, while supermarket sales growth began to lag its main competitor.
The company reported a loss for the six months ended Dec. 31 of A$972.7 million ($703 million) as it recognized a A$3 billion impairment charge related to its home-improvement venture Masters. That compared to a profit of A$1.28 billion a year earlier.
Banducci is charged with reinvigorating the primary grocery business, which is being undermined by Aldi discount stores and Wesfarmers Ltd.-owned Coles. His appointment rounds off a global search of more than six months as the company seeks to arrest declines in profit and sales, sell money-losing assets and regain investor confidence.
Woolworths shares initially fell on the news though rallied later in the day to close 2.1 per cent higher at A$22.34. The shares have lost 35 per cent over the past 12 months, almost double the decline for the benchmark S&P/ASX 200 Index.
"To go for an internal candidate who was in charge of the supermarkets division that hasn’t performed up to scratch is a little surprising," Daniel Mueller, a Sydney-based analyst at Morningstar Inc., said by phone. "It’s now about executing on the turnaround strategy and getting more competitive on price. Then perceptions will change and customers will eventuality come back."
Banducci was the only internal executive out of the three candidates shortlisted for the CEO role, Chairman Gordon Cairns said in a media call. He was selected given his retail experience and performance while leading Woolworths’s liquor business, Cairns said.
Woolworths same-store food and liquor sales dropped 0.6 percent in the three months ended December 31 and haven’t beaten Coles for at least 24 consecutive quarters, according to data compiled by Bloomberg from company filings. The company doesn’t anticipate a "significant" improvement in the measure in the second half amid competition, it said in a separate investor presentation Friday.
"We are rebuilding the Woolworths business," Cairns said in the statement. "While we have made progress, it will be a three to five year journey and there is much to do." The retailer invested A$150 million in the first half to lower prices, the company said.
South African-born Banducci, who joined Woolworths in 2011, ran the retailer’s liquor group from 2012 till he took over the food business. Before Woolworths, he was chief financial officer at Tyro Payments and a director at the Boston Consulting Group.
Woolworths’s profit before the writedown stood at A$925.8 million in the first half, 33 per cent lower than the previous year and compared with expectations for a net income of A$948 million, according to the mean estimate of four analysts surveyed by Bloomberg.
Woolworths and Lowe’s Cos plan to exit their unprofitable Australian home-improvements venture Masters after a failed six-year attempt to take on market leader, Wesfarmers’s Bunnings Ltd. The business lost A$138 million before interest, tax and significant items in the half, Woolworths said.
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