Sydney - Woolworths Ltd said Grant O’Brien will retire as chief executive officer after less than four years at the helm, as Australia’s largest supermarket chain struggles with competition from discount rivals.
O’Brien, 53, will remain in the role until the company finds a successor, Sydney-based Woolworths said in a statement on Wednesday. The company also cut its full-year profit forecast and said it would fire 1 200 workers.
O’Brien, who began work at Woolworths in his twenties as a shelf stacker, had pledged to restore profit growth that ran at more than 10 percent annually for a decade. Acknowledging that recent performance had been “disappointing,” he said net profit will fall 12 percent in the current fiscal year - the second drop under O’Brien after 12 years of unbroken growth to 2011.
“Woolworths was king of the supermarket business in an expanding economy while competition was unfathomably low,” said Jeremy Hook, who helps manage about A$350-million including Woolworths shares as investment director of TMS Capital Pty in Sydney. “It’s probably a good thing he’s going. The market’s been baying for blood and the record under his watch is poor.”
Woolworths shares, which closed at their lowest level in three years on Monday, were 1.8 percent higher at 11:50 a.m. in Sydney. They have declined 11 percent so far this year against a 3.3 percent improvement in the S&P/ASX 200 benchmark.
Last job
O’Brien said on a media call after the announcement he isn’t looking for another job and considers his departure from the company where he’s worked for 28 years his retirement, not a resignation.
“Very few people get the privilege of being CEO in a company that they grew up in, and I had that privilege,” he said. “I don’t think that you can recreate that somewhere else.”
With a combined market share of more than 78 percent, Woolworths and Wesfarmers Ltd, which owns its main rival Coles, have become two of the top seven retailers globally by net profits. That’s under threat from German discounter Aldi, which has doubled sales in the country since 2008 and could repeat that by 2019, according to UBS Group AG.
“We set out clear strategies to grow our businesses over the next three years and we have been working hard to execute these plans,” O’Brien said in the statement on Wednesday. “However, the recent performance has been disappointing and below expectations.”
Profit guidance
Net profit in the full fiscal year will fall to about A$2.15 billion, from A$2.45 billion last year, as a result of discounting its products and investing in stores to win back customers, Woolworths said. The company will take one-time costs of about A$270 million to pay for about 1 200 redundancies, changes to business practices and selling property assets at a loss.
Woolworths has tried and failed for 21 consecutive quarters to overtake Coles in the key measure of sales growth from grocery stores open at least 12 months.
The measure has so far fallen about 0.7 percent in the June quarter, after adjusting for the timing of Easter. If sustained, that would be the first quarterly fall since at least 2007. Australian supermarkets made up about 84 percent of Woolworths operating income last year, according to data compiled by Bloomberg.
Sales from Big W stores open at least 12 months have fallen 12 percent in the quarter to date, while those from the loss-making Masters hardware joint venture with Lowe’s Cos. gained 18 percent.
“Aldi have taken 10 years to get under anyone’s skin and they’ve been consistently underestimated,” said Hook. “Woolworths was the shoppers’ choice but customers have now switched to Coles or Aldi and it will take a bit of convincing to win them back.”
Bloomberg