Woolworths exec to give evidence in Masters property deal case

A senior Woolworths executive, a co-architect of the Masters hardware chain, will give evidence about a failed property deal.

Woolworths executive Richard Champion was deeply involved in securing properties to build Masters stores. Picture: Getty Images

A senior Woolworths executive, a co-architect of the supermarket’s Masters hardware chain, will appear in a Melbourne courtroom on Monday to give evidence about a failed property deal.

The testimony could shed light on the ­creation six years ago of the struggling hardware retailer, which is still racking up massive losses.

Richard Champion, head of property for Woolworths’ home improvement division that oversees Masters, will be cross-examined by lawyers for property developer Brendan Blake over a soured agreement for the developer to build and lease out a ­Masters store in the Victorian ­regional town of Bendigo in 2009.

He will be the most senior executive of Woolworths called to give evidence in the civil court action taken by Mr Blake, a property developer and founder of Maxi Foods.

Mr Champion has in-depth knowledge of the early formulation, inner workings and rollout plans for the Masters chain.

Along with current Woolworths chief executive Grant O’Brien — who in 2009 was heading the development of the Masters business — Mr Champion was deeply involved in securing properties to build Masters stores.

Already aired in court were private emails between Mr O’Brien and Mr Champion that showed the rush Woolworths was in to beat arch rival Bunnings to the best available sites, as well as the supermarket group chasing deals with property developers, such as Mr Blake, before the design kits for Masters had even been ­completed.

Judge Clyde Croft was also ­informed that key notebooks kept by Mr Champion about meetings with Mr Blake were lost or ­destroyed.

During cross-examination this week, Woolworths senior development manager Tim Macmillan also claimed he had lost a key notebook that covered talks with Mr Blake.

Mr Blake’s barrister, Peter Bick QC, is expected to grill Mr Champion at length as to his part in the creation of Masters and negotiations with property developers, all of which could see more confidential and commercially sensitive details around the hardware business laid bare.

Last week, Woolworths joint venture partner in Masters, US hardware giant Lowe’s, released details of its latest quarterly performance, showing Masters had reported its worst ever quarterly loss of $66 million for the three months to May 1. Lowe’s has a 33 per cent stake in Masters.

Based on the loss, analysts now believe Masters’ full-year loss for 2015 could blow out to more than $200m. Over the past few years Masters has booked total losses of $500m as it struggles to reposition the retailer with a better store format and more attractive product range.

It also faced a tough competitor in market leader Bunnings, which had racked up 21 years of uninterrupted sales and profit growth.

“Masters remains a problem,” said Argo Investments chief executive Jason Beddow. “Replicating the footprint of what Bunnings has done will be impossible.”

Woolworths is also pushing through a new strategy to resuscitate earnings at its flagship Australian supermarkets business, the earnings engine of the group, which has suffered flatlining sales of late as it battles Coles and German discounter Aldi.

“I think (Woolworths) got complacent about how bad Coles was for a long time,” Mr Beddow said.

“I think Woolies have also underestimated Aldi and Costco. Whereas Coles have had one eye on Woolworths, but have also thought about Aldi and these other low-cost players with good offerings as true competitors.

“Woolworths have some work to do. But they still have the largest footprint of supermarkets in the country. They should be able to do better on price because they have the largest supply chain, and they have a solid brand.’’

Woolworths plans to invest more than $500m to lower prices, with further investments in ­improving stores and service.