New Woolworths Boss May Be Year Away as Cairns Asks for Patienceby
New chairman has interviewed three external candidates
Woolworths had no internal successors when O'Brien resigned
Woolworths Ltd., the Australian supermarket chain looking for a new boss, said it may be another 12 months before fresh leadership is installed, complicating a turnaround that the company already expects will take years.
Chairman Gordon Cairns, who joined Woolworths in September, said he has interviewed three external candidates to far. But after factoring in non-compete periods, it might take between nine months and a year to replace outgoing Chief Executive Officer Grant O’Brien, Cairns told reporters after the company’s shareholders meeting in Sydney on Thursday.
“It’s a long time,” said Daniel Mueller, an analyst at Morningstar Inc. in Sydney. “I can’t recall anything like it. The risk is that without a CEO they just keep chugging on and the issues don’t get addressed.”
Woolworths has been trying to fill its top job since June, when O’Brien announced his retirement and described the company’s recent performance as “disappointing.” Cairns appealed for patience from shareholders, already hurting from tumbling Woolworths shares this year, as he warned disgruntled customers aren’t likely to rush back.
The chain needs new blood to fight assaults on all fronts. The primary grocery business is being undermined by Aldi discount stores and Wesfarmers Ltd.-owned Coles. At the same time, a home-improvements venture with Lowe’s Cos. is losing money as it struggles to rein in the market leader, Wesfarmers’s Bunnings.
Major decisions can’t wait for a new CEO, Cairns said. The top priorities are reinvigorating the supermarkets, which account for 70 percent of profit, narrowing losses at the home-improvements unit, Masters, and sharpening leadership at Big W, the discount-goods chain where earnings have halved in five years.
When Cairns joined Woolworths, he said his most pressing task was finding someone to lead the almost 200,000-strong workforce. Addressing shareholders Thursday, he said the board had asked O’Brien to stay on as CEO until his successor was found because there were no internal candidates at the time.
“We could not have continued without him in place,” Cairns said.
Woolworths shares dropped 1.5 percent in Sydney on Thursday, extending this year’s decline to 22 percent. The benchmark S&P/ASX 200 Index has fallen 3.7 percent in the same period.
Investors at the meeting, many of them also Woolworths customers, complained to Cairns of drab decor and smelly aisles, high prices and misleading advertising. One said his local Masters outlet had more staff than customers.
Woolworths last month said profit in the first half of this financial year will fall as much as 35 percent from a year earlier. Its key measure of sales in the first quarter -- revenue from Australian food and liquor stores open at least 12 months -- fell at the fastest rate in records dating back to at least 2005.
Research showed that Woolworths had been charging customers between 2 percent and 3 percent more than the company’s closest rival, according to Cairns. It’s biggest supermarket competitor is Coles.
“Customers who abandoned us because we were uncompetitive will not suddenly switch back,” Cairn said, describing Aldi as a “major threat to our growth.” Plans to revitalize the supermarkets business will take at least three years to bite, O’Brien said.
Cairns said Thursday the board is “open minded” about the future of the home-improvements venture with Lowe’s, but said its current losses can’t continue. While the business plan hasn’t been properly executed, there’s still a market opportunity, he said.
Lowe’s has an option to sell back its 33 percent stake in the venture. Woolworths, which owns the remainder, carries that put option on its books as a A$886.5 million liability, according to the company’s 2015 annual report.