Kmart’s saviour Guy Russo retires from Wesfarmers

Kmart was broken and battered when Wesfarmers hired Guy Russo, and he turned it around. Now he’s moving on again.

Guy Russo turned Kmart into one of the nation’s best-performing chains. Pic: Steve Tanner

Wesfarmers has announced the surprise departure of Guy Russo, the highly successful former McDonald’s Australia boss who was hired 10 years ago to rescue the then-struggling department store chain Kmart and who since turned the retailer into one of the best performing chains in the country.

Under Mr Russo’s watch Kmart’s sales have lifted by almost 50 per cent and its profitability has increased five-fold.

At a closed meeting with suppliers two years ago Mr Russo famously divulged the secrets of the crowded $18 billion discount department store sector.

“So if you want to know the difference between Big W, Target and Kmart, you are going to hear it from me — nothing,’’ Mr Russo told the meeting as he strutted the stage with a microphone.

“We sell stuff to people that people don’t need at low prices. You don’t die if you don’t go to a Big W, or a Kmart.’’

Mr Russo’s planned departure marks another sweep of Wesfarmers’ key management ranks since CEO Rob Scott took over in November.

Mr Russo will in November retire as CEO of Wesfarmers’ discount department store division, which holds Kmart and Target, as well as from his role as the boss of Target.

It follows a string of high-profile management departures at Wesfarmers over the last year which have seen a lot of talent walk out the door.

In the last year Wesfarmers has bid farewell to the much-respected boss of its Bunnings hardware chain, John Gillam, Wesfarmers CEO Richard Goyder and CFO Terry Bowen and the boss of Officeworks Mark Ward. Next month will see the boss of its biggest business, Coles’ John Durkan, leave to be replaced by new supermarkets CEO Steven Cain.

Wesfarmers said Kmart managing director Ian Bailey will take over the additional responsibility of heading the department stores division.

Marina Joanou, chief financial officer of Wesfarmers’ department stores division, has been promoted to MD of Target, effective immediately.

Wesfarmers said after November 1, Mr Russo will remain as an adviser to Wesfarmers and the department stores division for the remainder of the 2019 financial year.

Mr Scott said Mr Russo had made a significant contribution since joining Wesfarmers 10 years ago as Kmart boss, leading the transformation of the brand into Australia’s most successful department store before becoming CEO of the new department stores division in early 2016.

“Guy leaves a valuable legacy that is reflected in the record profit result for the department stores division for the 2018 financial year,” Mr Scott said.

“He has led a world-class turnaround of Kmart into one of Australia’s best product development and retail companies. Under Guy’s leadership, Kmart’s earnings have increased more than five-fold and more recently he has led a significant reset of Target, reducing its cost base and returning it to profitability. The record department stores earnings announced today demonstrate the enormous value that has been created for shareholders.”

Mr Scott said Mr Bailey was a natural successor to Mr Russo, having initially played an instrumental role in the turnaround of Kmart and then successfully leading the continued growth of the business over the last two years.

When Wesfarmers first approached Mr Russo to run Kmart in 2008 he was living in Hong Kong in semi-retirement following a successful stint at McDonalds in Australia and China.

He came back to Australia to discover a broken and battered Kmart business that was suffering from poor staff morale, collapsing sales and profits and crumbling stores.

When he started at Kmart in 2008 Kmart generated sales of $3.998bn and delivered flat earnings of $109 million. By 2017 sales at Kmart had lifted to $5.57bn and earnings were growing strong to hit $553m.