JOHANNESBURG – Woolworths’ share price leapt nearly 10 percent on Tuesday as the market welcomed the resignation of chief executive Ian Moir, while the failure of the retailer’s David Jones acquisition continued to haunt the company.
Woolworths jumped 9.6 percent at 12.04pm to R52.83 a share, as the market celebrated “fresh blood” at the helm after Moir’s nearly decade-long tenure.
The share closed 8.3 percent higher at R52.20 on the JSE on Tuesday.
The group said Moir would be replaced by South Africa’s Roy Bagattini, 56, the president of global apparel brand Levi Strauss & Company Americas, who has a track record in mergers and acquisitions.
Woolies said Moir would be acting chief executive of David Jones, the Australian brand that the company acquired in 2014, intending to expand its footprint by creating a Southern Hemisphere retail giant but which had disappointed.
“To facilitate a smooth transition, Ian will be working closely with Roy and he will also continue in his role as acting chief executive of David Jones,” the company said.
Moir has come under pressure due to the David Jones acquisition as various strategies to turn Woolworths around had thus far failed, and the group was trying to change the business model.
Woolworths chairperson Hubert Brody said under Bagattini’s leadership management would continue to drive the group’s future strategy.
“Roy has extensive operational, management and turnaround experience in global consumer and retail markets, which will prove invaluable as we continue to navigate the structural changes taking place in the retail sector and the challenges particular to our group,” Brody said.
Michael Treherne, a portfolio manager at Vestact Asset Management, said with the failure of the David Jones acquisition and several senior managers resigning, the market started to feel that fresh blood was needed at the top.
“Ian Moir has also been in the chief executive job for just more than nine years. There is an argument to be made that it is healthy to have some rotation at the top,” said Treherne.
Treherne said the Moir legacy, unfortunately, would always be remembered for the poor acquisition of David Jones.
“In my view, his biggest contribution to Woolies was the development of their food division.
“As it stands, it is the best part of the business,” Treherne said.
Woolworths in August requested Moir to fix the David Jones brand by spending significantly more time in Australia to oversee its turnaround in the role of acting chief executive of the brand, which impaired A$437.4 million (R4.34 billion) during the year to June 2019.
Lulama Qongqo, an investment analyst at Mergence Investment Managers, said Moir’s stepping down as group chief executive was much needed.
“The poor capital allocation decision to buy David Jones, that eroded shareholder value, came after his appointment - his overinflated remuneration suggests otherwise.
“I believe Ian Moir is in denial about the structural changes that are happening in the global department-store landscape, and he might perhaps be suffering from the Dunning-Kruger effect - there are some structural changes that even the most astute management cannot avoid,” said Qongqo.
In psychology, the Dunning-Kruger effect is a cognitive bias in which people assess their cognitive ability as greater than it is.
However, Qongqo’s main concern about Moir's resignation was that he was still a part of the group and continued to be the acting chief executive of David Jones.
She believed it was more positive that Bagattini’s wealth of knowledge and experience was likely to benefit the group and its shareholders.
“The market has spoken through today’s share price move,” Qongqo said.