Wesfarmers CEO Richard Goyder (centre) with Bunnings boss John Gillam (left) and Target and Kmart boss Guy Russo
When lecturing the rest of us about the need to tighten our belts, work harder and accept lower wages, it helps business leaders if their own performance is top notch. Alas, Wesfamers — aka the Western Australian branch of the Business Council of Australia — has turned in a shocker.
Wesfarmers is chaired by former BCA heavy Michael Chaney (he used to be chair of NAB and was CEO of Wesfarmers); current CEO Richard Goyder is a BCA director (and a favourite of the Australian Financial Review), while the current CEO of the Business Council, Jennifer Westacott, is a non-executive director of Wesfarmers. All very cosy, and not at all to the taste of many of the BCA’s business sector colleagues, who wonder if the BCA and Wesfarmers are sufficiently disentangled when the former talks about issues such as cutting penalty rates, opposing an effects test, improving productivity or changes to industrial relations. The BCA of course is no fan of trade unions — although it probably has a soft spot for the right-wing SDA, which struck a controversial deal with Coles (owned by Wesfarmers) cutting penalty rates and other extra payments to tens of thousands of Coles employees, without their knowledge. That agreement has been disowned and is under investigation by the Fair Work Commission.
But we digress: this morning, Wesfarmers produced its 2015-16 results, and as most in the market had forecast, the company has reported an awful result, due to previously revealed impairments and write-downs in the value of the Target department store chain and coal interests in Queensland. On top of that, the company’s trading performance was worse than some investors had expected. Full-year profit plunged by more than 83% to $407 million, while underlying profit, excluding the $1.84 billion in losses and write-downs from the company’s Curragh coal mine and the Target chain, fell 7.7% to $2.25 billion, short of analyst forecasts of a 6% fall to $2.29 billion. Wesfarmers cut its final dividend to 95 cents a share, taking the total 2016 dividend to $1.86, down 7% from $2 payout for the previous financial year.
With the possible exception of the Queensland coal write-down (which surely could have been done a year ago when coal prices were looking bad), Wesfarmers’ problem are home-grown. Guy Russo is now in charge of fixing up the Target mess; as part of the revamp, around 500 people, mostly from the Geelong area, have been sacked, and the retailer’s HQ has been moved back into Melbourne, ostensibly to cost cuts. It looks an awful lot like ordinary Target workers have paid the price for larger problems at Target and higher up at Wesfarmers.
Perhaps a little less distraction from their BCA duties would help Goyder and Westacott at Wesfarmers. Perhaps they could even heed the now-widespread calls for the BCA to be shuttered altogether. Liberal powerbroker Michael Kroger says the BCA is hopeless, irrelevant and should be abolished; Kroger’s partner Janet Albrechtsen today reported in The Australian business luminary David Murray declared the BCA “has been ineffective for a long time”, that current chair Catherine Livingstone was “naive” and that her record at the BCA was “about as bad as her legacy as chair of Telstra” (ouch).
Or perhaps Wesfarmers can just move the entire BCA in-house. Perhaps there’s some spare room at the new Target HQ.