The biggest discount of all? Watch Roger Corbett, the former CEO of Woolies and still the eminence grise at the country’s biggest, but now stuttering, retailer. After another weak quarter of sales or two, like the first quarter reported yesterday, and we will be seeing change at the top of Woolworths, with Roger the Dodger’s hand in there somewhere. The sales figures for the third quarter show the retailer and its senior managers have lost the plot completely and are being beaten, hands down, by rivals Coles and Aldi, the German hard discounter. Former CEO Michael Luscombe was eased out by the board when sales growth slowed five or so years ago (and Corbett’s hand was detected in that change) and, before that, Reg Clairs was eased out in the late 1990s for the same reasons (clearing the way for the long reign of Roger Corbett).
Now, Grant O’Brien seems on his way to making it a trio, with the added baggage of the ill-thought-out move into hardware with the Masters chain to try to take on Bunnings, which is the star performer for Coles and its owner Wesfarmers. The new strategy outlined yesterday by O’Brien and senior managers is all about regaining sales momentum and growth that the same management team allowed to fade away. You have to wonder whether it is smart to allow a situation where the same team that created the problem at Woolies can solve it. And how do they propose to do it? By the age-old ploy of slaughtering the innocents, with 800 jobs to go at Woolies, while the guilty remain in place. — Glenn Dyer
Disgraceful cuts. So, when management stuffs it up, the first thing they (and a compliant board) do is to chop jobs and save their own. All in the name of “cost cuts”. Woolies took that disgraceful route yesterday revealing plans to axe 800 people — 400 have already been snipped and another 400 are to go. There were notable absentees from that job cut mention — chairman Ralph Waters, the former CEO of Fletcher building in NZ and Email Ltd in Australia — just the sort of background for a major retailer. The rest of the board is pretty light on for retailing experience as well. Total third-quarter sales were down 2.1% to $14.96 billion, year on year. And for the 13 weeks to April 5, 2015, total Australian food and liquor sales were up just 1.7% on a top-line basis, to $10.62 billion, with same-store sales up just 0.2%. Both figures are adjusted for an extra week in Easter. Same-store petrol sales slumped by 19.3% year on year, Easter adjusted.
In the company’s heartland and big profit centre, Australian food and liquor, sales were reported as being “subdued” in April. That’s all the fault of poor management and poor pricing (surveys are showing consumers now believe Woolies is now more expensive than Coles, even if they are neck and neck). Sales at Big W fell 5.7% on a top-line basis, or a very nasty 7.3% on a same-store basis, adjusted for Easter, thanks to selling off unsold stock at lower prices. (Coles’ Kmart is going gangbusters, ruining life for Big W and Coles’ other department store chain, Target). Home improvement sales rose 21.7% to $455 million as Woolworths opened two new-format Masters stores and tweaked its range in existing stores. But that’s immaterial. Bunnings is well ahead and growing its sales by double-digit amounts as it continues to open new stores. Woolies has an estimated $1.5 billion invested in Masters and not getting a penny back, except losses of over $100 million a year. Radical action is needed to right Woolies’ ship (and many of the moves at the strategy day yesterday first appeared in a similar statement back in 2011!) That includes dispatching a few at the top to encourage the others and to tell the 800 innocents that they are not alone. — Glenn Dyer
NAB’s UK blues continue. Remember the UK-based Clydesdale bank (and therefore NAB) were fined a record amount month or so ago by UK regulators for lying to customers and regulators about compensation? Besides the sell-off of Clydesdale and the issue — which means around $2.3 billion will go to boosting the bank’s Australian capital holdings — NAB announced that former Treasury head, Dr Ken Henry would replace chairman Michael Chaney, later this year. That continues the trend of former Treasury heads chairing Australian banks; Henry’s predecessor, Ted Evans chaired Westpac for a number of years. The rights issue is larger than anything announced during the dark days of the GFC, that’s the giveaway about the problems the NAB needs the money for to make go away — starting with the black hole in the UK (aka Clydesdale Bank). — Glenn Dyer
NAB’s weak result. News of the Clydesdale sale overshadowed a weak interim result from NAB this morning. Ignore the silly reporting of a 20% rise in the bank’s statutory profit, and a 5.4% rise in cash earnings to $3.32 billion. The real result — excluding the fines associated with the Clydesdale Bank lying and breaches — was just 0.3%. Interim dividend was set at 99 cents, unchanged on a year ago after the 2014 interim was lifted by 6 cents. The static payout is a better indicator of the way the bank’s directors see its future: under pressure and strained. It signals a gloomier view of the future.
The ANZ interim rose, but the rate of growth also slowed. Both Westpac and ANZ revealed plans to raise fresh capital through a discounted 1.5% off the share price, dividend reinvestment plan — Westpac to raise $2 billion, ANZ by up to $800 million over the next six months. NAB, because of the need to boost the capital levels of the Clydesdale, needed much more. With the flat third-quarter update from the CBA, the days of growth by buying banks is over for the time being. Economic reality has caught up with the banks and shareholders. Even though housing is still booming, the increasing competition and hardline regulation from Australian Prudential Regulation Authority and the RBA is resulting in bank profit margins (and interest margins) falling and costs rising. Soon the banks will start moaning about rising costs and the need to cut staff and branch numbers. No wonder the greedy buggers at the Commonwealth, Westpac and NAB wouldn’t pass on all the 25-point rate cut from the RBA this week. They were the three banks that released the weakest reports this week. — Glenn Dyer