Analysts concerned hunt will distract David Jones
Recent gains in like-for-like store sales in the first quarter after years of flat to negative growth could also come under pressure.
Analysts warned on Tuesday that operational disruption at the 175-year-old department store was expected as the board sought a new chief to replace Paul Zahra, which could take more than six months.
Several elements of Mr Zahra's restructure of the business, begun in March last year, could also be challenged or changed, including a move to small-format stores, the group's online strategy, and a shift to a greater proportion of private label clothing and fashion products in the store.
However, retail insiders believe there is nothing sinister to Monday evening's announcement that after only 3½ years in the role, Mr Zahra had announced his intention to resign and would leave when a new boss was found.
Shares fell by 2 per cent when the market opened on Tuesday and closed 6¢ weaker at $2.79.
JPMorgan analyst Shaun Cousins said Mr Zahra's departure would distract the business.
"CEO succession is likely to take time with disruption expected," Mr Cousins said.
"The extensive national and international search could take at least six months, if not longer, in our view.
"Furthermore, it will occur as Myer is looking to replace CEO Bernie Brookes, who is retiring in August 2014, providing even greater competition for retail talent.
"As a result, we remain concerned that like-for-like sales growth ... could remain subdued for the remainder of fiscal 2014."
Fashion apparel business Oroton's former head Sally Macdonald is considered a front runner for David Jones along with senior DJs executives including the manager of merchandise Donna Player.
Michael Simotas of Deutsche Bank said the fact Mr Zahra would remain in his role until his successor was appointed showed his departure was his own decision.
"While this suggests there is nothing more sinister ... [it] does not signal that the group's performance is about to improve," Mr Simotas said. "We believe David Jones has demonstrated some progress in its efforts to address the structural challenges facing the business. However, sales have continued to decline ... In our view, this is unlikely to change without a permanent CEO."
Frequently Asked Questions about this Article…
The search for a new CEO at David Jones is expected to disrupt the retailer's transformation into a successful omni-channel business. This disruption comes at a critical trading period that accounts for nearly half of its annual profit, potentially affecting recent gains in like-for-like store sales.
During the CEO transition, David Jones may face operational disruptions, as the search for a new leader could take more than six months. This period of uncertainty might challenge or change elements of the current business restructure, including the move to small-format stores and the online strategy.
Paul Zahra announced his intention to resign after 3½ years in the role, and he will remain until a successor is appointed. His decision to leave is seen as his own, with no underlying issues suggested by retail insiders.
Following the announcement of Paul Zahra's resignation, David Jones' shares fell by 2% when the market opened and closed 6 cents weaker at $2.79.
Potential candidates to succeed Paul Zahra include Sally Macdonald, former head of fashion apparel business Oroton, and senior David Jones executives like merchandise manager Donna Player.
The CEO transition at David Jones coincides with Myer's search for a new CEO, as Bernie Brookes is retiring in August 2014. This creates greater competition for retail talent, potentially complicating the search for both companies.
Analysts are concerned that like-for-like sales growth at David Jones could remain subdued for the remainder of fiscal 2014 due to the CEO transition and ongoing structural challenges.
David Jones has shown some progress in addressing structural challenges, but sales have continued to decline. Analysts believe that significant improvement is unlikely without a permanent CEO in place.