Banducci secure the CEO and MD role after an international recruitment search. Banducci indicated in June last year that he would be a candidate for the top job, but most observers had expected an international retail executive would be recruited to provide a fresh pair of eyes to the challenges confronting Australia’s biggest retailer. Banducci has had no great mis-steps in his career, but there are arguably no spectacular achievements either and his hands-on retail experience is relatively thin. It would seem Woolworths has opted for a repairman rather than risk another adventurer and Banducci’s strategic management experience with the Boston Consulting Group probably had more to do with his appointment as CEO than anything in his retail toolkit. Woolworths’ board has apparently decided that it currently needs a steady pair of hands to settle the nerves of investors and staff. The argument for an internal appointment would have been bolstered by disquiet in Woolworths ranks about a succession of external appointments to its businesses which once, like the top job, were the prize of executives nurtured by the retailer and promoted through the ranks. Against the arguments for an internal appointment with Banducci, the only realistic candidate was the risk of negative investor sentiment given the misadventures of Grant O’Brien who has now left the company after a long period of warming the CEO’s seat. The epitaph for the O’Brien years is a near $1 billion loss for the first half of the 2016 financial year, the first loss reported by Woolworths since it listed as a public company 23 years ago. While the performance of the food and grocery business was underwhelming, the loss was essentially the result of O’Brien’s catastrophic foray into the hardware market with the Masters Home Improvement venture. The hardware disaster was not the folly of O’Brien alone, but he was its champion and faced an inevitable decision to hasten the closure of a near 30-year career with Woolworths as the bad news kept rolling in with battles with regulators, supplier discontent, Big W and food and grocery market share and earnings retreats, a procession of executive departures and, to top it off, the Masters Home Improvement debacle. Banducci has had some cheerleaders out praising his elevation to CEO but most analysts are reserving judgement. Banducci is better qualified than former Coles CEO, John Fletcher, who famously announced when appointed to that job that he didn’t shop in supermarkets. But, arguably, Banducci is not ahead by much in that head to head. He is certainly not as seasoned as the management team at archrival, Coles or, for that matter, at Aldi. Banducci has had a bare 12 months as MD of Woolworths food group, a period when earnings have fallen, sales have failed to keep pace with competitors and market share has been eroded despite initiatives to reinvigorate supermarket performances, including investment in lower prices and the shaving of margins. Prior to his appointment as MD for food and liquor, Banducci was MD of Woolworths Liquor Group and director of liquor from 2012, a year after he joined Woolworths. Banducci joined after the acquisition of the Cellarmasters Group, a wine direct retail and production company. He was CEO of that company from 2007 to 2011. Banducci’s prior experience included a period as CFO, director and later a non-executive director at Tyro Payments, an EFTPOS systems supplier, and prior to that as a director with The Boston Consulting Group. He was a core member of the strategic management firm’s retail practice for 15 years, working on a number of acquisition and improvement programs for retailers. An entrepreneur at heart Announcing the CEO appointment, Woolworths chairman, Gordon Cairns, said Banducci had proved through a rigorous international search process to be the best person to rebuild the Woolworths business and return it to sustainable growth. “While there were several strong candidates, the board was unanimous that Brad was the strongest of the field,” Cairns said, relying on the 15 years spent in consulting to boost Banducci’s retail experience to a more impressive 25 years. The retail experience factor for Banducci, who moved to Australia in 1988, was also bolstered by weekend work in his parent’s clothing business during his school years in South Africa. However, Banducci’s hands-on bricks and mortar retail experience is effectively less than four years – and three years of that was spent in Woolworths’ liquor group, a business that was doing quite nicely before he took over as MD. Cairns claims Banducci is “uniquely positioned” for the CEO role as he “clearly understands the Australian market, has a total commitment to our customers, and a great track record of growing valuable businesses and developing his people”. Banducci, who describes himself as an entrepreneur at heart and a retailer by discipline, says he wants to take Woolworths back to its best levels of performance by being innovative and focussed on the customer and winning their trust. “My goal as CEO will be to recapture the spirit of innovation and customer focus right across the business, and to grow a culture where our people once again feel a strong ownership of the business.” In the short-term, Banducci will remain MD of Woolworths Food Group while the retailer determines who should take over the day to day running of the supermarkets, convenience store and fuel operations that are the core business for Australia’s biggest retailer. Banducci’s short-term agenda also includes repairing relationships with suppliers and regulators, especially the Australian Competition and Consumer Commission, while assessing the future prospects of the Big W discount department store chain and exiting the Masters Home Improvement venture. Big W has been under a board microscope in the past 12 months with sales, earnings and market share all faltering. Former Oroton CEO, Sally Macdonald, was recently appointed as MD for Big W, another appointment that surprised given that her experience was in specialty retail and luxury goods at that, rather than mass merchandise retailing. Banducci and Macdonald have a lot of work to do to revitalise the flagging Big W against fierce competition from rival discount chains, Kmart and Target, which are being merged into a single corporate structure. In the half-year to January 3, 2016, Big W’s sales ingloriously fell by 3.9 per cent to $2.27 billion, while net earnings crashed by 39 per cent to $67.3 million. Banducci takes aim at Masters Exiting Masters Home Improvement is the big ticket agenda item for Banducci and it is one area where his consulting experience will be invaluable. With provisions for the hardware venture exit, Woolworths has taken a massive hit to its earnings in the latest half-year. The retailer has posted a net loss of $972.7 million for the half, compared with a $925.8 million profit for the same 26-week period in 2015. The financial repercussions are not yet at an end with wrangling between Woolworths and its joint venture partner, Lowes, over the value of the Masters Home Improvement chain and consequent buyout price for the American home improvement retailer’s one-third stake. Lowes made a $737 million provision in its most recent accounts for the failed Masters Home Improvement chain and has indicated it may take legal action to preserve the value of its stake under the buyout clauses in the original joint venture agreement. Woolworths is not expecting any return on its exit from the venture and admits that it may need to make a further writedown on its full financial year accounts to cover lease penalties on store closures, staff entitlements, losses on inventory clearances and the buyout settlement with Lowes. Cairns and his revamped captain’s pick board of directors and Banducci are well aware of the reputational damage the hardware disaster has done to Woolworths as much as the operational and financial impacts. Banducci has already signalled a focus on rebuilding staff morale in the wake of a horrid 2015 calendar year, as well as an obvious re-focus on customers and supplier relationships. The retailer will take the big financial hit from the hardware venture this financial year, but Banducci claims it will take up to five years to get Woolworths back hale and hearty, a task made more difficult into the future by the competitive pressures of Aldi and Costco as much as the traditional rivals, Coles and IGA. Banducci claims initiatives already taken in the supermarket business are showing positive results, but an investment of more than $650 million in price cuts has yet to recapture customers and sales growth. For the first half of FY 2016, food and liquor sales barely bettered the same period in 2015, increasing by just 0.7 per cent to $22,35 billion (excluding fuel sales) while net earnings plunged by 31.7 per cent to $1.29 billion, with the profit figure including a contribution from the fuel business. O’Brien’s exit    While Banducci rolls up his sleeves to get to work on the myriad of problems for the retailer, O’Brien slips away quietly after a promising tenure at the top that soured primarily on the back of the ambitious but ill-conceived hardware venture. O’Brien’s retirement was announced on June 17, 2015 and he will formally cease to be a Woolworths employee in August after completing leave entitlements. O’Brien had a 29-year career at Woolworths, including just over four years as CEO, and is highly regarded as a person. But he seems to have made a truism of the old adage that nice guys finish last. Want more Inside Retail? Subscribe to Inside Retail Weekly now and get our premium print publication delivered to your door every week.