David Jones stretched for a perfect CEO fit

David Jones and rival Myer are both searching for new leaders, rattling already nervous retail investors.

The operational risk of David Jones just went up a few notches as Paul Zahra plans to step aside as chief executive officer once a suitable replacement is found.

While an outside replacement could bring fresh ideas, Australia doesn’t look flush for candidates. Note that Myer is also looking for a CEO as Bernie Brookes plans to hang up his tie next year.

Fearing a less than desirable outcome, market nerves have sent David Jones down over 1.5 per cent  today. Anxiety is focused around Zahra’s resignation sparking a potential change in current strategies, coming at an economic cost to David Jones – an unintended consequence the group simply can’t afford.

On occasion, the departure of a chief executive is well received by the market. Earlier this month Matt McCann’s resignation from iSelect sent the insurer soaring 8.3 per cent in a single day. When it was announced Chris Ryan walked away from his position as chief executive last year due to a tiff with the board, Perpetual gained 3.8 per cent.

The same fate has not held for David Jones and it looks like it would be difficult to pick a worse time for Zahra to have resigned. Understandably, the market is cautious about the future of the retailer in a difficult environment.

The outlook for retailers is tough enough as consumers watch their bank balances in conjunction with relentlessly increasing costs of doing business. To navigate what has become only too familiar for retailers, a difficult operating environment, Zahra implemented the Future Strategic Direction Plan only last year.

Under Zahra’s guidance, David Jones has moved to be an omni channel retailer, the initial stage of the plan. The strategy included a new online site and mobile-enabled web store to exploit various means of engaging with customers. David Jones also offers the option for same day delivery and ‘click and collect,’ where customers buy online and then venture in store to collect goods.

The technology and physical infrastructure to implement this strategy has been costly and it is still in the early stages, just gaining traction. It does however now allow David Jones the flexibility to focus on the next stage of Zahra’s plan – customer-centricity. While the group acknowledges retailing is tough, it has positioned itself to benefit from any strength in consumer sentiment.

When Zahra took over from Mark McInnes in 2010 he already had notched up 12 years with David Jones, understandign the business and operating environment intimately. A change in leadership could scupper Zahra’s plan for the department store.