Talk about dead men walking. Coles CEO John Fletcher and his chairman Rick Allert looked and sounded absolutely dreadful during yesterday’s half year profit briefing as their abysmal strategy was junked and blame was sheeted all over the place.
And if they looked tired yesterday, how are they going to feel in six months when a tortuously complex sales process will finally be completed?
Fletcher is easily Australia’s most sackable CEO at the moment and it is hard to see why he’s being retained to help run the sales process. After all, this is the bloke whose “strategy” to convert 200 Bi-Lo stores into Coles has been abandoned two thirds of the way through after the 124 conversions produced 4% lower sales.
Even worse, the conversion of 40 Kmart stores into Coles has also been dropped and now we’re told that same store supermarket sales are likely to fall in the current period.
Fletcher and Allert have been running Coles minus Solomon Lew and Stan Wallis for more than four years, yet only recently did they decide to cut the head office numbers from 7500 to 5000, 905 of which were dumped during the latest half year.
Even Target’s profits are now flat-lining as the benefits of going to a brutal China-only supplier system peter out, whilst Kmart earnings retreated 22% in the latest half.
The contrast with virtually all its competitors is stark indeed. Private equity buyers love cash flows and Coles only managed to produced $44 million of it in the past six months, compared with $858 million for Woolies. No wonder it is worth $16 billion more than Coles without a takeover premium priced in.
David Jones shares hit a record high of $4.80 yesterday as lost Coles executives Mark McInnes and Stephen Goddard continue to deliver the goods. And even the former Woolworths lads running Myer have delivered a stunning turnaround in less than a year after buying the business for $1.4 billion.
Even Solomon Lew has added more than $200 million to his personal fortune from canny retail investments in the likes of Colorado and Just Group since he was given the flick by the Coles board. That said, it’s hard to imagine Solly having the ticker to shell out the estimated $3.5 billion that will be required to snap up Target.
Still, once the sale process is complete, Solly’s totally debt-funded original investment in Myer way back in the mid-1980s will have delivered him a clear profit of almost $1 billion once the break-up and sale is complete, despite all the scandals and blunders along the way.
That’s what happens when you have the most powerful grocery duopoly in the world.
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