Woolworths CEO and managing director, Grant O’Brien, has announced his retirement today amidst reports the company will retrench 1,200 people as part of a new project aimed at driving returns to shareholders.
O’Brien cited the recent performance of the company as “disappointing and below expectations,” and in regards to the company’s new cost cutting program called ‘Fuel For Growth’ (FFG), he believed it would be in the best interests of the company for “new leadership to see these plans to fruition.”
A global executive search including internal and external candidates will now be conducted by the Woolworths Board to appoint a new CEO.
O’Brien will continue to serve as CEO and MD during this period and he said: “Woolworths is family to me and I have been honoured to work alongside our team of 200,000 hard-working, talented people for the past 28 years.”
Redundancy costs will be between $40 and $50 million
Redundancy costs are part of the FFG program and will be between $40-to-$50 million with plans to reduce 400 support roles and a total reduction of approximately 1,200 roles across support functions, supply chain and non-customer facing store positions.
Woolworths will also dispose of a number of properties that they are now unlikely to develop. This will incur a loss in the range of $30-to-$40 million.
“In addition to our plans to reduce 400 support roles announced at the Investor Day in May, we have identified additional opportunities to improve efficiency and remove outdated processes,” O’Brien said.
“As outlined at the Investor Day, we have continued our focus on managing the balance sheet to release cash and drive returns to shareholders. Within our existing property portfolio, we have an opportunity to dispose of a number of properties some of which we are unlikely to develop within the next five years,” he added.
Woolworths now expects to deliver FY15 net profit after tax to be approximately $2.15 billion.
New format and range for Masters stores
In August last year, Woolworths announced a new format and range for its Masters stores and by the end of FY15, approximately 20 per cent of the Masters stores are now trading in this format.
Reported by Appliance Retailer here, Masters posted a loss of $176 million for the 2014 financial year, bringing its total loss for the past two financial years to just under $333 million. At the time, O’Brien said the Masters venture will not meet forecasts and will not break even until at least the 2017 financial year.
Tributes paid to O’Brien for his 28 years with the company
Woolworths chairman, Ralph Waters, said: “I would like to pay tribute to Grant O’Brien for his commitment to Woolworths over 28 years. On behalf of the board, senior management and staff, I would like to thank Grant for his ongoing contribution and for his willingness to stay at the helm until we appoint a successor.”
Waters acknowledged that Woolworths’ recent financial performance has been disappointing and said the company is committed to plans and strategies developed at the company’s recent May Investor Day.
He added: “We are on track to exceed the forecast of $500 million in cost savings across FY15 and FY16 and we have commenced investing these funds into lower prices, better service and an enhanced offer for customers.”
“It will take time for the improvements we have made to convert into sales momentum,” he added.