Is Amanda Bardwell the one to lead Woolies out of its funk?

The new Woolworths boss will need a bolder strategy to turn around the sagging retailer but it’s nearly a mission impossible to now reverse decades of poor execution.

New Woolworths CEO Amanda Bardwell has some major challenges ahead of her. Picture: Renee Nowytarger

As new Woolworths boss, Amanda Bardwell has a near-impossible task ahead of her to return the retailing major to the glory days.

In her first earnings outing, Bardwell has at least admitted Woolworths had a problem by losing its way with customers. Although her fix is not so clear, and there’s no concrete plans to grow the top line.

Woolworths is now at its lowest ebb since the Masters debacle nearly a decade ago. And it all comes back to the perennial problem at Woolies – poor execution.

With its shares going nowhere for nearly four years and an energised rival Coles running rings around it in terms of sales, there’s little by way of a solution, except an ambition to slash $400m from a bloated cost base this year.

Even that comes with plenty of execution risk.

There’s also a commitment to review underperforming businesses, but this lacks a firm commitment to get out of areas that aren’t contributing.

A strike action in the lead up to Christmas caused nearly $100m in lost earnings. Picture: NCA NewsWire

The Woolworths board led by Scott Perkins needs to take much of the blame after veering into Qantas territory of being captured by a long-serving chief executive.

In this case, the former Woolies boss Brad Banducci was distracted at the end of his tenure with a string of low-scale acquisitions that added little to Woolies’ core business. It came as it was also locked in badly-handled political and media battles.

All this meant Woolies had been slow to recognise problems bubbling up in its most important business which is it was no longer perceived to be leading on pricing and supermarket customers were simply turning off.

Woolworths posted a 20 per cent drop in first half profit to $739m. This was below where the market had been aiming, and the interim dividend was cut by 17 per cent, to the lowest level in three years and equal lowest since the Masters’ era.

Bardwell was part of the same management team that had allowed Woolworths to drift, albeit she was behind the faster-growing WooliesX eCommerce business and she also had loyalty as part of her remit.

Now as CEO, she needs to prove to a doubting market that she has what it takes to pull Woolies out of its funk. And that’s really getting back to supermarket basics.

Bardwell passed one early and bruising test over industrial relations.

In the lead up to Christmas, she refused to back down from offering a supersized wage claim without tying it to productivity gains. Here, Woolies was using technology and data analytics to improve reliability in the supply chain.

The dispute was costly in terms of sales – wiping nearly $100m from earnings – but the greater cost was a hammering to reputation in the lead-up to Christmas. Woolies’ Voice of Customer (VOC), a measure used to track satisfaction, is plumbing a multi-year low of 44, down eight points on the year. Worryingly, on the in-store measures that Woolies can control, VOC also drifted lower.

Former long serving Woolworths Group chief executive Brad Banducci retired last September. Picture: NCA NewsWire

Woolworths had already been on the nose with shoppers and an ACCC legal action into alleged fake discounting, and the empty shelves gave them another reason to go to well-stocked rivals.

Still, Bardwell refused to budge over weeks then directed Woolworths to get the Fair Work Commission to order the striking workers back on the job.

No one wants to see dirty laundry impact customers, and Bardwell admits this part of the dispute could have been handled better.

There are three areas that Woolies needs to fix before it can be declared match fit.

Supermarket supremacy

The most urgent is getting its flagship supermarkets business firing again.

Bardwell says Woolies was slow to recognise customers were feeling cost of living pressures and were going to multiple retailers be it Coles, Amazon or even local operators to get the best value.

Last year, Woolworths was gripped with poor execution yet again, as it switched to an everyday low pricing policy well after the worst of the inflation bubble had hit.

At the same time, there was confusion around its “red” and “yellow” tickets it reintroduced after opting for digital shelf pricing.

After years, Woolworths hasn’t been able to hit consistency on pricing and will need to spend up significantly on discounting to win over customers.

This will no doubt come at a cost to margins. Bardwell has put in Annette Karantoni, the supply chain executive who oversaw the development of the near $1bn national warehouse based in western Sydney, as the new supermarkets boss. This suggests Bardwell is considering more work at the back end is needed to get Woolies on track.

The problem with Big W

The second is fixing the dire position of Big W, which has been a problem child for far too long. Earnings are collapsing on higher costs and a range that’s not resonating as rival Kmart takes momentum in the discount department store space through its Anko range.

Bardwell tells The Australian that Big W will be part of the portfolio review, with an eye to how the earnings profile will look over the next three to five years.

Big W has undergone a number of reviews and resets over the past two decades, and there’s no certainty that another will make a difference. Bardwell has put new management into Big W.

Even with the exit from pubs and liquor retailing, Bardwell acknowledges Woolies is still too complicated, by virtue of her wanting to simplify the business. The focus for Woolies should be on the core business of selling food, she says.

Despite the best analytics in the land, Woolworths’ had been losing touch with its customers. Picture: NCA NewsWire/Joel Carrett

Customer trends

Finally, and maybe the hardest is Woolworths is not getting the balance right in responding to shorter term fixes and a well-defined long-term retailing strategy.

It is a worry that the biggest and most data-savvy retailer in the land simply missed a major shift in customer preferences over the past year, with value being the number one driver of behaviour.

For too long Woolies sought to pull too far ahead of customers where they should have been working with them to give them an excuse to spend more.

Bardwell says there is an “absolute understanding” what customers want, with value now top of mind.

With so much short-term focus on her plate, she risks falling behind rival Coles which is well ahead with the massive investment needed to automate its supply chain.

Although it’s early days, this is starting to have a difference in terms of lower costs. Bardwell needs a bolder strategy to sell to investors.

One bright spot for Bardwell is New Zealand is finally coming together, although it has taken much longer and has been more costly exercise than planned to take its brand across the Tasman. Although much of the momentum was in eCommerce.

In opting for an internal management succession last year, the Woolies board may have missed the bigger picture. And this was, Woolies was underperforming and had needed a pair of fresh management eyes to take it forward.

It’s now all on Bardwell to deliver.

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Originally published as Is Amanda Bardwell the one to lead Woolies out of its funk?