Defending the rejection of two KKR bids for Coles last spring, chair Rick Allert and CEO John Fletcher said they would achieve a profit of $1.06 billion next year and that shareholders should stick around to reap the benefits of this unrealised potential.
But the view from inside the company was very different. Since the bids were knocked back, I’ve spoken with several senior Coles managers who said it was inevitable the company would be sold or broken up. Often these discussions were in the context of them wanting to jump ship.
The view commonly expressed to me by these dispirited senior Coles people was that a billion dollar profit was either unachievable or could only be reached by taking short-term decisions that would result in longer-term damage to the company’s performance and prospects.
When Woolworths released their excellent results last month, it was reasonable to speculate that their growth must have been in large part at Coles’s expense.
Now comes this morning’s profit downgrade from Allert and his announcement that the Coles board was reviewing ownership options.
To ensure Fletcher has sufficient time to run the review process — and presumably maximise the price — the man who said when appointed that he hadn’t been in a supermarket for twenty years is giving up day-to-day management of the business.
Coles has appointed current grocery head Mick McMahon as Chief Operating Officer of all their retail businesses. Not too long ago McMahon was heading Coles Express. He was appointed guardian pro tem of supermarkets after former chief grocer Peter Scott was fired over his relationships with a key meat supplier.
In two blinks McMahon has gone from running a smokes, petrol, drinks and ice business to head of a vast and complex retail offer. If a bid is successful, we may never have time to see whether he was up to the job.