JOHANNESBURG – Woolworths extended its losses on the JSE yesterday after the food and clothing retailer announced the surprise resignation of veteran banker Gail Kelly and businessperson Patrick Allaway as independent non-executive directors with immediate effect.
The group stock fell 3.29 percent to R45.80 at the JSE close yesterday, as the market digested the news just days after the departure of David Thomas, the chief executive of the Australian unit, David Jones (DJ), who quit citing personal reasons. On Thursday, Woolworths fell nearly 3 percent after the group announced Thomas’ abrupt resignation.
Equity Analyst at Argon Asset Management Bjorn Samuels said Allaway and Kelly’s resignations were concerning as they were effective immediately with no reasons given.
“Albeit that previous DJ chief executive David Thomas resigned last week due to personal reasons, the frequency of high executive turnover at Woolworths Australia in recent years, now coupled with two non-executive director resignations, is an increasing concern for investors,” Samuels said. “One can only speculate what the reasons are behind the recent resignations and who could potentially be next.”
Samuels said Woolworths remained under pressure after overpaying for DJ and writing. Thomas became the third DJ chief executive to resign in five years heightening fears about the high executive turnover at DJ.
Woolworths said it would continue to seek to supplement its composition by the appointment of additional independent non-executive directors. Samuels said the resignations were a setback and would likely extend the timing of a DJ turnaround, we believe that the disposal was not currently on the cards. “Running a globally unfavoured shopping format (department stores) in the current environment is already a challenge, but when one adds on the complication of introducing a new food format, completion of a A$200 million (R1.92 billion) flagship store, consolidation of head office with Country Road Group and constant management changes you quickly have a recipe for disaster – which could in part explain the poor performance of DJ since acquisition,” Samuels said.
Kelly was appointed as a non-executive director in 2015 and has served on the company’s nomination, remuneration, sustainability and risk and compliance committees.
She previously held several positions in the Nedbank Group and was the chief executive of St George Bank and Westpac in Australia.
Allaway joined the Woolworths board in 2014 and served in the audit, treasury, remuneration, and risk and compliance committees. He was previously the non-executive director and member of the audit committee of Metcash Limited, a leading Australian wholesale distribution company and an ASX Top 100 listed company.
Ron Klipin, an investment analyst at Johannesburg based Cratos Wealth said Woolworths chief executive Ian Moir was cleaning up the poor performance.