Woolworths’ home improvement chain, Masters, has lost two of its top dogs within days of each other, leaving everyone thinking the chain is far from in good shape.
Masters farewelled its marketing boss Dion Workman after just one year in the job, and co-architect of Woolworths’ less-than-positive foray into home improvement, Masters director Melinda Smith, has resigned mere months before the board is scheduled to make a decision on its future.
However, the supermarket giant has said this departure does not signal any change in strategy at Masters, which continues to report severe losses of more than $600 milllion over the past four years.
Workman, who joined Masters in October last year as general manager of marketing after three years at Kmart, farewelled the store this week, with his replacement set to be Woolies’ GM of corporate marketing Luke Dunkerley.
And while Woolworths confirmed Workman’s departure, it rejected whispers that his exit could be the start of a planned wind-down of the chain, given its largely unimpressive financial history.
Smith is due to depart at the end of December, after working her way up from chief operating officer of Masters to director in July 2013.
Smith was forced to contfront investors in July 2013 and admit that Woolworths had made a big mistake, big, huge, in its venture into home improvement, overestimating sales and gross margins, underestimating labour costs and the impact of seasonality, and getting wrong parts of its product range.
“We didn’t know a lot about this business when we set the budgets for 2013,” Smith said, per Fairfax reports. “We didn’t know much about seasonal curves, and we didn’t have the right stock in some instances.”
Woolworths chairman Gordon Cairns told Fairfax that Woolworths could not continue to lose $200 million a year at Masters, and that a decision would be made on its future after management brought forward a five year plan early next year.
“We can’t continue to lose $200 million a year – businesses are not in business to lose money,” Cairns said. “I’m open minded about the options.”
But Cairns is under pressure from shareholders and analysts to pull the plug on Masters, with The Bank of America Merrill Lynch analyst estimating, per Fairfax, that cash realisation could return to more than 110 per cent “if Woolworths were to exit home improvement and BIG W and revert to being a high-cash-generating supermarket operator”.
Deutsche Bank also put its two cents in, predicting that Masters had lost $67.5 million in the first quarter after losing $57 million in the same quarter last year. The home improvement chain is forecast to lose almost $300 million this year after losing $245 million in 2015.