Coles Boss Will Have Big Task
The Age
Saturday February 9, 2008
IAN McLeod's appointment to the top job at Coles supermarkets has been warmly welcomed by Wesfarmers shareholders, but analysts have warned investors not to expect much improvement in the stores until next year.
Shareholders propelled Wesfarmers shares almost 5% higher to $39.03 after the Perth-based conglomerate announced it had chosen the Scottish retailer to lead the revival of the flagging Coles supermarkets.Analysts were also positive about the appointment, with Macquarie retail analyst Greg Dring saying Mr McLeod had been responsible for steady growth and a solid performance at British car and bicycle retailer Halfords, where he is finishing up this month. "Despite lagging acceptance of the Coles acquisition, with capable leadership now in place the turnaround story has more credibility and momentum," Mr Dring said in a note to clients. UBS retail analyst Michael Peet said the appointment was "the first in a series of milestones that Wesfarmers needs to deliver to turn Coles around", but told investors not to expect much until the 2009 financial year.Mr McLeod has the mammoth task of lifting sales and profit margins at more than 700 supermarkets now owned by Wesfarmers following the biggest takeover in Australian corporate history last year.Wesfarmers boss Richard Goyder is confident Mr McLeod can revitalise the culture at his ailing supermarkets and in time win back market share from formidable rival Woolworths.While supportive of the appointment, Citi retail analyst Craig Woolford said it was problematic that Mr McLeod would not start his new role until May, "leaving a lack of direction at Coles for another three months"."This may push out the time frame for profit improvement," he said.Credit Suisse analyst Andrew McLennan said Mr McLeod's pay packet, which includes a $2 million sign-on fee, may lead other Wesfarmers executives to "become disenfranchised by such a material disparity of remuneration".Cazenove analysts in London said Mr McLeod was "well regarded by investors", noting his departure from Halfords created "unwelcome uncertainty" for the company, which on Thursday reported slowing sales growth.
© 2008 The Age