We must “urgently address the future” Woolworths chairman

By Pippa Chambers & Sarah Homewood | 26 November 2015

Woolworths' annual general meeting kicked off this afternoon (Thursday) with a stern and honest address from its chairman Gordon Cairns.

Cairns, confirmed the business, which lost $200 million on one of its sub-brands Masters this year, is still on the hunt for a CEO and “won't rush” the process. It is also still without a CMO after top marketer Tony Phillips' sudden exit in May.

In June, Woolworths CEO and managing director, Grant O’Brien, announced his retirement after 28 years with the business and four years in the top job.

“Can I start by acknowledging your disappointment, and ours, at where we find ourselves. The results for 2015 were frankly unacceptable, and the disappointing share price performance has reflected this,” Cairns said.

“The entire senior leadership group takes responsibility for the poor results, and the company’s most senior leaders - Ralph Waters as chairman and Grant O’Brien as CEO – have stepped aside to make way for new leadership. Now, I feel is the time to move on, as we can not change the past, but we must learn from it, and urgently address the future.”

He said Woolworths today finds itself in a very different position, but he is convinced that while the business has stalled, it can be returned to “those great days”.

“We have made some mistakes, acknowledged those mistakes, publicly learned from them, and now are going about fixing them,” he said.

“But this will take time, and we as a board and management team will not be rushed to quick fixes. The potential in this organisation is immense, but we need to be clear on our game plan.”

He went on to say that Woolworths needs to “restore the culture of customer centricity”, which was its hallmark for years.

“The most important people in our business are our front line staff, for they interact with the customers on a daily basis. They know what we need to do better, and we must listen to them, and empower them to act,” Cairns added.

“In order to integrate this into the business, we need to change from a knowing culture to a listening culture: listening to our store staff as to what we could do better, listening to our customers on whether we provide value, and listening to our suppliers on how we improve the partnerships.

“This cultural transformation is fundamental and will ensure that the strategies and programs we implement will stick.”

He said customers who “abandoned” them, did so because Woolworths was uncompetitive, and admitted that it will not suddenly switch back, and that laying down its future pathway will not happen overnight.

Cairns outlined the urgent priorities of the business, highlighting reinvigorating its supermarket business, which makes up 70% of its profit, as being a strong number one.

He revealed the business has improved the service level in stores by adding staff and ensuring availability, and is upgrading the look and feel of stores. However, Cairns noted it will take time to get back to where it was. 

The business' second priority is overhauling its struggling business Masters. Cairns said the opportunity in home improvements is compelling and that it is a growing market, however it has with a high degree of fragmentation, noting “there is plenty of room for a strong number two”.

“We have identified our competitive advantage,” he said. “But execution has let us down. And it is clear that we cannot afford as a business to continue losing over $200 million a year. When I joined I said I had an open mind on Masters, and that the board would be informed by the numbers from the five year plan and our options from that. This is what we as a board are working on.

Big W is also on the priorities list, with Cairns highlighting Big W is making half the profit it was five years ago. Cairns said the 'Discount Department Store' sector is rapidly changing and is highly competitive, but the business has not helped itself with its value proposition.

Grant O'Brien followed on from Cairns' address saying he agreed with what was said, adding there are opportunities available for the business to overcome its challenges.

“Woolworths is a strong business and has the potential to be even stronger. Our scale, network, supply chain and proven ability to extract operating efficiencies provide a strong competitive advantage,” he said.

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