Sales success meets governance mess at Super Retail

It’s a toss-up for what is more compelling about Super Retail Group, the conglomerate that owns Rebel, Super Cheap Auto and BCF (boating, camping, fishing). That the company’s sales held up in a retail recession is interesting, but that its chief executive achieved this outcome under the glare of a governance scandal of epic proportions really grabs the spotlight.

Chief executive Anthony Heraghty is fielding legal allegations that this company has a culture of bullying, that he misused company expenses and had an undisclosed relationship with another executive.

Super Retail CEO Anthony Heraghty all smiles on results day.Credit: Dominic Lorrimer

We were made aware that this governance train wreck had been coming since late April when the company dropped the bombshell that it was waiting for two ex-employees to begin a legal case claiming damages between $30 million and $50 million.

On Thursday, Heraghty fronted the media and investors declaring he and his management team were “on the tools” while deftly avoiding the governance/legal elephant in the room.

Increasingly, boards have become disinclined to “stand by their man”  in the face of bullying or harassment allegations against C-suiters.

In fairness, the matter is now before the court with a statement of claim lodged in late July by the company’s former chief legal officer Rebecca Farrell – a page-turner that alleges Heraghty screamed at staff with such force that he was spitting, and that an internal staff review revealed a response that the company needed a leader “not encumbered by personal relationships or [who] is egotistical or creates a different class for himself and those close to him”.

Farrell, who is also suing chief executive Anthony Heraghty and outgoing chairwoman Sally Pitkin, described the workplace as being seriously dysfunctional and is supported by a second former Super Retail internal lawyer Amelia Berczelly, who also raised serious governance concerns with the company’s board and is engaged in a separate legal action against the company.

Farrell’s statement of claim goes on to allege that in an executive team meeting to discuss the staff survey, a visibly angry Heraghty told the team: “If you’re not on the bus, then get off and go. You’re not welcome here.”

The company has denied the accusations and said it had conducted a review and an external investigation after which it determined that there was nothing to see here.

Doing so exposes the board to some serious risks. If the legal action reveals more incidents of poor behaviour or bullying, or if Farrell is successful in winning a sizable financial outcome, it could infect the professional standing of directors.

Legal action remains a cloud over Rebel Sport owner Super Retail Group. Credit: Fairfax Media

Increasingly, boards have become disinclined to “stand by their man” in the face of bullying or harassment allegations against C-suiters.

Shareholders don’t like being associated with companies that have any whiff of tainted ESG issues.

But all the drama moved to the background on Thursday as attention turned to running shoes, yoga mats, fishing tackle, tents, backpacks and automotive lubricants and how Super Retail managed to keep like-for-like sales steady for the 2024 financial year in the face of a retail recession.

Sally Pitkin, the outgoing chairman of Super Retail Group.

Sure, earnings went backwards by around 10 per cent, but discretionary retailers that have reported 2024 results have all struggled to deal with customers hit by the cost-of-living crisis.

And Super Retail shareholders received a shot of sugar with a special fully franked dividend of 50¢ – on top of the ordinary 37¢ dividend payment.

The additional dividend certainly implies that the company is confident in future earnings – an outcome that is supported by the first seven weeks of trading since the new financial year in which group sales have bounced to be ahead 3 per cent on a like-for-like basis.

But the halo effect of a better-than-expected financial performance has its limits.

The legal action on foot remains as a cloud over the company that could become more threatening after suppression orders covering partially redacted documents filed by Farrell were lifted but remain in place pending an appeal by the company.

In the toss-up, my money is on the governance mess.

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