Woolworths CEO Grant O’Brien has just announced he will retire, citing disappointing and below expectations results at the supermarket group.
“At the recent investor day we set out clear strategies to grow our businesses over the next three years and we have been working hard to execute these plans. However, the recent performance has been disappointing and below expectations. I believe it is in the best interests of the company for new leadership to see these plans to fruition.”
Sales in December were subdued and this has continued into this year. Australian Food and Liquor sales performance in April was disappointing. And today Woolworths says there’s been no improvement in May and June to date.
“Our recent performance has not been acceptable to any of us,” O’Brien told an analyst briefing after today’s announcement.
The company now forecasts a flat full year profit for the 2015 financial year when it had just three months ago been expecting 1.8% growth. The previous result was $2.45 billion.
“Australian Food is on a three year journey to get customers to put us first consistently and our sales results will be volatile in the short term. It will take time for the improvements we have made to convert into sales momentum,” O’Brien says.
Forecast cost savings of $500 million in 2015 and 2016 are expected to be exceeded. This includes the loss of about 1,200 jobs with redundancy payments of $40 million to $50 million.
One bright spot is home improvement where sales increased by 19.8% in the fourth quarter so far. Timber and Hardware reporting growth of 21.9% and Masters 17.7%.
The major supermarket players are under pressure. The German chain Aldi has grown in Australia mostly at the expense of Metcash’s IGA chain but that’s about to change as the supermarket starts to chip away at Woolworths and its major rival Coles.