Coles spin-off: Why Wesfarmers CEO Rob Scott is shaking things up
THE spin-off of Coles changes next to nothing for shoppers, but changes everything for its parent company ... and Target could be the next chain cut adrift, writes Terry McCrann.
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PUTTING Coles into a separate company all on its own won’t change the dynamics of supermarkets or the individual experience of shoppers.
Coles and Woolies will continue to go head to head against each other with Aldi and to a lesser extent IGA and perhaps — still only perhaps — Amazon snapping at their heels.
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It won’t so much be business “as usual” — in the 21st century there’s no longer such a thing as “usual” any more — it’s all 24/7 relentless, punishing change for any and all businesses. But it will be business — the battle of the aisles — as it’s been for the past decade.
The move is all about financial and investment engineering by Wesfarmers under a new CEO — and, in some ways even more interestingly, an “old is new again” chairman of the board of directors.
Former Olympian Rob Scott became CEO last year.
He’s now very decisively set about stamping his mark on the company and its businesses.
He’s doing so by largely unwinding the big — the really big — move of his predecessor, Richard Goyder.
Back in 2007, Goyder essentially kicked off his term in the top job with the $20 billion takeover of the Coles Group. Scott is keeping the non-food businesses bought at that time — the highly successful Kmart and the seriously “challenged” Target.
But most of the $20 billion was in the buying of Coles, the No. 2 supermarket chain to Woolies.
Interestingly, Goyder made the big move after succeeding the highly successful Michael Chaney as CEO.
The unwinding is now taking place under Chaney — he returned to the board and became chairman in 2015.
The 2007 Coles buy significantly diluted all Wesfarmers’ previously spectacular performance metrics.
The demerger will now go some way to returning them to their old levels.
Those fabulous group performance metrics were built on the success of Bunnings, which had dominated the hardware retailing space and has skilfully grown into the broader category of home improvement.
Bunnings now has its own problems with the move into Britain. But the Aussie business remains very profitable and still has huge growth opportunities.
Separating off Coles will make Wesfarmers somewhat less of a retailer, with its traditional non-retail businesses to make up a greater share of the overall group.
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But the future of the Scott-Wesfarmers and the success, or otherwise, of its CEO will still turn just as much as that of the Goyder-Wesfarmers on success in the retail space.
And in particular, on meeting — and succeeding — the online digital challenge.
The big difference is to separate the Coles/supermarket challenge from the more focused ones facing Bunnings and Kmart, where Wesfarmers has shown it can succeed.
In the wake of this move, it wouldn’t surprise to see Target go on the chopping block.
That would probably mean a sale — it couldn’t be floated off like Coles; it’s just too small and (to be generous) underperforming.
The brutal alternative might be its closure.
Scott has emphatically stated he is going to be a CEO prepared to take the big — and the tough — decisions.
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