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Woolworths' [JSE:WHL] share price jumped by more than 9% on Tuesday morning following news that its CEO, Ian Moir, will be stepping down in mid-February.
Roy Bagattini, a South African executive who is the current president of Levi Strauss' operations in America, will replace Moir on February 17, the retailer said.
Woolworths said Bagattini brings more than 19 years of experience working in international markets, as well as experience in turning around companies. He previously held executive positions at SABMiller (ABInBev) and brewing company the Carlsberg Group.
The group's share price, which opened at R49.25 a share on Tuesday, climbed over 9% to reach R52.57 by 12:50.
Alec Abraham, a senior equity analyst for Sasfin, noted that the market had taken the news "in a positive light" given that Moir was the "driving force behind the failed and costly David Jones acquisition."
Under Moir's leadership Woolworths acquired the Australian-based retailer in 2014 for R21.5bn. It has since had to write down more than R6bn of that value, Fin24 previously reported.
In the 2019 financial year, David Jones knocked the group's headline earnings by 5%. In August the group announced Moir would move to Australia to try turnaround David Jones as acting CEO. Woolworths said on Tuesday that he would continue in his role as acting CEO of David Jones.
Ron Klipin, portfolio manager of Cratos Asset Management, said the announcement that Moir is stepping down is "not unexpected" and appears to have earned a "thumbs up" by the market. He added that Moir's experience at David Jones will be of importance in its turnaround phase.
"Roy Bagattini would appear to be the right candidate in terms of successor, with his global experience as President of Levi Strauss, where he was responsible for turnarounds of several global corporates," Klipin said.
Gryphon research analyst and portfolio manager, Casparus Treurnicht, said he believes that Moir was pushed out. "For 9 years, I think the track record is especially bad for Woolworths," he said of Moir's legacy.
Treurnicht added that Moir was squarely responsible for the David Jones deal – which was "the wrong acquisition at the wrong time", given that many SA retailers who tried to move offshore returned with their "tails between their legs".
"I am actually surprised that Moir stayed on for so long," Treurnicht said.
Sack David Jones, keep food
He expects Bagattini to close the "whole Australian operation" within the first year and make other tough decisions to close underperforming stores.
Given that Bagattini's experience in turning around companies, Treurnicht said he expects the new CEO will not have any emotional attachments to cut off businesses if they do not have future potential.
Treurnicht added the new CEO might also address internal management structures to get the right people in place at the group. He cautioned not to place too much emphasis on the recent rally of the group's share price, saying that a lot of work that needs to be done. "It's going to be a long process to turn that around, especially in this environment," he said.
"[There are] too many moving parts in Woolworths, he must probably relook the whole thing and decide where retail fits in SA today. Retail has changed," Treurnicht said. He explained that with online stores gaining traction, retailers need to consider what value proposition their bricks and mortar stores offer.
Both Klipin and Treurnicht are of the view that Woolworths' food division is its crown jewels. Woolworths has strong brands and fresh and prepared foods which "command a premium rating" compared to its peers in the industry, Klipin said.
Treurnicht, meanwhile, expects to see changes in the group's fashion segments rather than its food division, and decisions will have to be taken on which clothing lines to keep.
He added that Woolworths may also have to address its "confusing" store layout. "The devil is in the details. That is how they are going to have to rationalise those stores."
In a statement on Moir's departure, Woolworths board chairperson Hubert Brody thanked Moir for his "custodianship" of the group over the past nine years. "We look forward to his continued contribution in delivering the turnaround strategy for David Jones as acting CEO," Brody said.
