From corporate kryptonite to retail rainmaker - Premier's McInnes leaves on a high

It is just over 10 years since Mark McInnes experienced the ignominy of packing his boxes and leaving his job as chief executive of Australia’s high-end department store, David Jones, following a sexual harassment scandal.

His departure as head of Solomon Lew’s Premier Retail, announced on Monday, is a very different affair. Lew spent the day in meetings with Premier’s other large shareholders, assuring them he will scour the globe to find an equally high calibre replacement for McInnes. It was a big call.

When McInnes left David Jones, his talent for retail was never in doubt, only his behaviour. During his seven-year tenure as chief executive of David Jones the company’s share price quadrupled.

Retail's dynamic duo - soon to part ways.

Despite his well recognised business acumen, McInnes was kryptonite in commercial circles back in 2010 - considered unemployable by public companies who were starting to recognise their corporate social responsibilities.

Billionaire retailer, Solomon Lew, ignored the public relations consequences in favour of picking up an executive bargain. The year after leaving David Jones, McInnes began his professional rehabilitation at the helm of Premier Retail.

The partnership of Lew and McInnes has been one of the most successful in the history of Australian retailing and richly rewarding for both.

But in a year it will come to an end. The decision to leave was entirely McInnes’, according to the ASX statement from Premier which said he was resigning to give more time to his family.

By the time McInnes will be able to rejoin the workforce he will be 58 and considered unlikely to take on another chief executive role.

And where he left millions of dollars in entitlements on the table when he left David Jones, McInnes will receive what is sure to be a hefty short term incentive payment, plus a full year’s base salary of $2.7 million. He has already pocketed Premier shares from vested long term incentives worth more than $23 million at today’s share price.

Lew has ensured McInnes, who will work out one year’s notice, won’t turn up working for a competitor - the terms of his departure include two years' retail industry gardening leave during which Premier will pay him his base pay for both years - a total of $5.4 million.

By the time McInnes will be able to rejoin the workforce he will be 58 and considered unlikely to take on another chief executive role.

He will likely be in demand as a consultant, while there is speculation he would be sought after in private equity circles.

Based on the half year profit update Premier Retail delivered to the market last week - expected to be up as much as 85 per cent on the same period last year - McInnes is leaving on a particularly high note.

Since joining Premier in 2011, the company’s share price has increased fourfold. When McInnes joined the company its market capitalisation was about $900 million, today it is roughly $3.75 billion.

Smiggle chief executive John Cheston and Peter Alexander boss Judy Coomber are seen as internal contenders to replace Mark McInnes.Credit: Louise Kennerley

Under McInnes, Premier has rolled out its Smiggle brand internationally, has successfully overhauled its distribution and logistics to profitably expand online sales and undertaken a massive overhaul of its physical stores - closing many and renegotiating deals with landlords to reduce rental costs.

Clearly Lew feels more than vindicated by his decision to employ McInnes - it is a relationship that has been particularly profitable for Lew who is a 42 per cent shareholder in Premier. His Premier shares are worth more than $1.5 billion.

"Premier has delivered year on year record operational and financial performance under Mark’s leadership. We have thrived in very challenging times while many of our competitors have struggled or failed," Lew said on Monday.

But now Lew faces the unenviable task of replacing McInnes - the man described as the tough guy of retailing.

The two potential internal candidates are said to be Smiggle’s chief executive, John Cheston, and Peter Alexander boss Judy Coomber.

Lew is particularly well connected in international retail circles, so is in a good position to find offshore candidates. But even Lew would need to concede the history of management imports to Australian retail has been mixed.

There are big shoes to fill and this was reflected in the 3.25 per cent fall in Premier’s share price on Monday.

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