Brad Banducci was appointed to the top job at Woolworths exactly eight years ago as the retailer was sinking in billions of losses as was reeling from a disastrous Masters hardware push.
Amid intense public pressure, Banducci will retire later this year. In isolation his exit represents nothing near a crisis of Masters proportions, but it comes as the retailer is starting to lose its way again.
The irony about the backlash aimed personally at Banducci is he has done more than anyone before him in smashing down Woolworths’ culture of management arrogance and injecting humility into the massive organisation.
Woolies chairman Scott Perkins insists Banducci’s retirement was a long time coming and the moment for the announcement had been the choice of the chief executive.
Banducci, who turns 60 later this year, revealed he even thought about delaying the announcement briefly given the public hits were coming thick and fast, but succession events were already well in train. Even after a hell of week, the CEO opted to pull the trigger.
“(Delaying) wouldn’t have been authentic in the context of what we were doing,” Banducci says. Still, investors were taken off-guard, sensing an over-reaction to reaction to a bad few weeks, and sent Woolies shares down nearly 7 per cent. Many had expected Banducci would step down shortly after Woolworths’ 100 year birthday in December.
But Perkins says planning for Banducci’s exit started in May last year, with headhunters appointed shortly after to look for external candidates and benchmark internal contenders. Talks between Banducci and his chairman continued through the year as the search field narrowed and the board selected Amanda Barwell, who heads up Woolies’ fast-growing e-commerce business. Barwell’s appointment points to Woolies’ board betting that digital and online shopping will play a bigger role than ever in Woolies’ future.
Even with the succession process underway it’s hard to separate Banducci’s exit from a disastrous few months spanning his bad mishandling of the Australia Day furore; the politics of price gouging; and ultimately Banducci’s trainwreck ABC television interview where the CEO walked off on camera.
Of that interview, where he was dismissive of former ACCC boss Rod Sims (a long time critic of the big supermarkets) Banducci says he called up Sims shortly after and apologised.
Banducci, who rarely lets his guard down, concedes to The Australian wasn’t his finest moment.
“My job is to accurately represent Woolworths. When I don’t I get upset with myself. But I can only do one thing which is get up and be better the next day. So rest assured I learn from each one of these experiences, painfully acknowledge them to the team and get on with it”.
For those that work with Banducci, the hostile narrative now swirling around the Woolies boss is a world away from the self-effacing, highly-personable executive who prefers yoga over the public spotlight.
Indeed on Tuesday night, ahead of a full day of profit briefings, Banducci popped in for a beer at The Fiddler, a sprawling western Sydney pub, where his state operations managers were meeting.
But with Woolworths battling persistent claims of price gouging – strongly rejected by the retailer – as well as a looming Senate inquiry and separate year-long probe by the competition regulator, the “public” Banducci has now become a distraction for Woolworths.
The announcement of the CEO transition has allowed Woolies’ board and management to break the narrative and take the heat off the company.
Banducci plans to step down at the end of August, continuing to take the “lumps and lessons” be it at the Senate or ACCC review. He believes this will give Barwell clear air needed to make the big decisions.
Profit pressure
The external issues piling up for Woolies come at a time when the big earnings engine is again starting to misfire. On Wednesday Woolworths posted a December-half loss of $781m – its first in eight years. There was an element of kitchen-sinking the bad financial news, with more than $1.7bn in writedowns from struggling New Zealand and other operations pushing it into the red.
Worrying, earnings at the long-pressured Big W discount department store chain were down 60 per cent in the December half. This contrasts with discount rival Kmart where profits are booming in the same space. Meanwhile, a Woolworths rebrand in New Zealand has so far failed to deliver with earnings there down more than 40 per cent.
The core Australian supermarkets business delivered a 10 per cent jump in profit, helped by fast-paced growth in online sales, but sales momentum has stalled from the start of the year and a new wave of cost inflation will continue to eat away at the business. Some of these problems will need long-term fixes.
Elsewhere, Woolworths has been increasingly distracted by acquisitions. The retailer is thought to have overpaid for its 50 per cent stake in pet chain PetStock, which early in the process became caught up in competition hurdles. Woolworths is still bedding down its 65 per cent stake in food distributor PFD and has a massive capex program ahead as it continues to streamline its supply chain.
Veteran retail analyst David Errington of Bank of America says investors should be reminded that when Banducci took over Woolworths was simply a basket case. Errington says Banducci turned the retailer around back to where it should be, but more importantly Banducci “has brought humility to the company”.
The past few months have taken their toll on the CEO for sure, but Banducci is taking a pragmatic view.
“Our customers are under pressure and we need to do whatever we can to help relieve that pressure,” the Woolies boss says. “That’s the key. Everything comes from various different manifestations of the financial pressure on our customers.”
johnstone@theaustralian.com.au
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