ceded that its enviable production line of strong leaders running back to the 1974 appointment of Paul Simons is virtually exhausted, with only Steve Greentree and David Marr likely contenders for the top job. Woolworths is undertaking a global executive search process to find a new CEO at a crucial time for the business, with the core supermarket division losing momentum and struggling to maintain margins and earnings growth and Big W losing market share with sales and earnings. Then there is the Masters Home Improvement imbroglio, the chain that O’Brien championed as a new profit stream for Woolworths and, according to his forecasts, a short-term winner that has proved anything but. There are many insiders at Woolworths who would argue that the retailer made the wrong decision choosing Michael Luscombe as CEO over Bernie Brookes, who then left the company and took the helm at Myer. However, there are many more who claim the biggest mistake was making O’Brien CEO over Greg Foran, who also left the retailer and Australia to head WalMart in China. For the past year, Foran has been president and CEO of WalMart’s business in the US and would now seem to be beyond the reach of Woolworths – unless he has developed a severe case of homesickness. O’Brien is a decent man, but much of his Woolworths career was served in Tasmania, far away from the head office politics of the retailer’s Sydney base. He was never really comfortable in the job and was oddly talking more than 18 months ago of life after his CEO role. Many observers believe O’Brien was pushed by a Woolworths board stung by increasing criticism of the retailer’s trading performance compared to its arch rival, Coles, and the ongoing problem in making the Master Home Improvement business work. Pushed or not, O’Brien is the first CEO since 1974 to cause Woolworths to stumble, interestingly, in part, because of pushback in blokey Woolworths executive ranks to his support for the promotion of women candidates such as Julie Coates and Melinda Smith to senior management ranks. The Masters disaster The crunch issue for O’Brien has been the failure of his baby, Masters Home Improvement, to show any genuine signs that it could realise Woolworths’ optimistic forecasts and the looming prospect that the US-based joint venture partner, Lowes, will pull the plug on its investment as early as October this year. Add to that problem the exodus of senior management in the past 18 months and some continuing discontent about the Dick Smith sale that saw Woolworths investors take a hit and the new owners strike instant pay dirt and it is easy to understand why analysts, investors, suppliers and staff are questioning the future. Recent management departures at Woolworths have included Julie Coates, former Big W MD; head of a supply chain logistics overhaul project, Tjeerd Jegen; the MD for the supermarkets and petrol business, Tony Phillips; the head of marketing; and Penny Winn, director of group retail services. Winn will, however, remain with Woolworths until November. Melinda Smith, the former MD of Masters Home Improvement, remains with the business, but Woolworths brought in British retailer, Matt Tyson, above her in January 2014 in a bid to breathe life into the hardware venture. While Woolworths’ food and liquor business has continued to post increases in sales each year, something most other retailers have failed to do in challenging market conditions, the core business has failed to match the growth of a rejuvenated Coles, Aldi and Costco. Brad Banducci now has the job of rebooting the Australian supermarkets business. Appointed to that role in February of this year, Banducci previously headed Woolworths’ liquor business. He joined Woolworths in 2011 from Cellarmasters and has previous career experience with the Boston Consulting Group. Banducci’s career is impressive, but it is thin in terms of retail experience. Woolworths will be relying on his team-building skills and a strong strategic focus if his appointment is to revive the chain’s momentum. Comparable sales for the business have virtually stalled in May and June with an increase of just 0.7 per cent, despite a $500 million program to cut costs, lower prices and improve service for customers and a revamped marketing campaign. Tyson has yet to achieve any significant improvement in the fortunes of Masters Home Improvement with the chain continuing to rack up losses, store development curtailed, low staff morale and insipid customer traffic through most, if not all, stores. Woolworths and Lowes had to inject a further $45 million of equity into Masters Home Improvement after the struggling chain posted a $66 million loss in the March quarter that is expected to see full financial year losses top $200 million. The joint venture has racked up losses of more than $500 million in the past three years, with the 2015 result, albeit incorporating some turnaround costs that include store refits, worse than the $169m loss of the 2014 financial year. Woolworths now has around $2 billion tied up in the hardware venture and Lowes around $1 billion. Lowes can recoup its share from Woolworths through a bailout clause in its agreement, which might well be exercised if Tyson cannot demonstrate a successful future and sustainable profitability for the business within a reasonable timeframe. ‘W’ for ‘woe’? The Big W chain is yet another problem child for Woolworths, suffering declining sales and earnings and losing market share in the crowded discount department store category. Alistair McGeorge was charged with turning around the fortunes of BIG W in June 2014. Before his appointment as MD at Big W, McGeorge had executive roles with British retailers, New Look, Matalan and Littlewoods. But as Guy Russo found with rival DDS chain, Kmart, and as Stuart Machin is finding at Target, there are no quick fixes in this retail category. Indeed, sales at Big W in the fourth quarter of the current financial year are reportedly 12 per cent down on the comparable period in 2014. A new CEO replacing O’Brien is certain to take a comprehensive new look at the Woolworths businesses and, while Woolworths chairman, Ralph Waters, has ruled out the sale of the Big W chain and remains optimistic about Masters Home Improvement, both could potentially be divested. The divestment of Big W would prune $3.4 billion from Woolworths’ revenues, while the Masters Home Improvement chain would only shed around $850 million if it was divested or closed down. Return on investment in both businesses is poor, but Masters Home Improvement is really facing a crunch decision with $3 billion invested in a venture that is achieving sales of just $850m and losses of close to one quarter of that revenue total at $200 million. The longer term pain for Woolworths is the more critical factor as O’Brien packs up his desk for an October departure. But in the short term the retailer will have to swallow some bitter medicine with job cuts increased from the February forecast of 400 to around 1200 and writedowns on its accounts for the full financial year of at least $270 million. The writedowns include the costs of redundancies, losses on the divestment of some properties the company no longer plans to develop and business transformation costs. Describing Woolworths’ recent performance as, “disappointing and below expectations”, O’Brien’s departure announcement was accompanied by advice to financial markets that net profit for FY2015 is expected to be $2.15 billion, down from $2.45 billion last year.