Goyder backs Target despite difficult times
Mr Goyder, speaking to BusinessDay on Monday, brushed aside suggestions Target should be folded into its better performing stablemate Kmart, or sold, with the Wesfarmers board choosing one of its British imports and Coles supermarket troubleshooters to rescue the fortunes of the division.
"Target needs to be stand-alone and we think there is a lot of shareholder value to be created in the business," Mr Goyder said.
He said Target's new boss, Coles store development and operations director Stuart Machin, would review all aspects of the business including the range of categories it offered under its apparel, fashion and general merchandise model, as well as its store footprint.
"I think it's always got to do those things, in terms of categories. Any retail business has got to keep looking at its fleet of stores, its offer and all of that, and it's got to be fast-moving."
It is believed that a front-runner to take over Mr Machin's role at Coles is the supermarket's executive Andy Coleman, who worked with him.
Target announced on Monday the shock departure of its boss of only 15 months, Dene Rogers, whose appointment was announced in October 2011 when the managing director of the time, Launa Inman, also departed following mixed financial results.
No explanation was given for his departure, raising a belief among investors and analysts that he had paid the price for Target's recent poor earnings performance.
Nomura retail analyst David Cooke said Target was churning through some transformational problems. "Any business that is in transformation is going to go through tough times, so it doesn't surprise me [about Mr Rogers' departure]."
Mr Cooke said Mr Machin was a good operator but his switch to Target came at a crucial time for Coles and he was concerned about the impact on the much larger supermarket chain. "How can the investment community not be concerned when you are taking one of the linchpins out of Coles just when Coles' supply chain is starting to fire up, and just when Coles' store growth strategy is starting to fire up?
"How can we not be concerned that you are plugging a hole in Target, but you create a bigger hole in Coles?"
In the 2013 half-year result Target saw its pre-tax earnings dive 20.4 per cent to $148 million. For the same period, its stablemate retail chain, Kmart, had a 25 per cent increase in pre-tax earnings.
Target's full-year earnings for 2011-12 were flat and included a charge of $40 million for a restructure of its supply chain.
At the half-year result Mr Goyder commented that higher costs associated with Target's transformation plan weighed on its earnings during the half.
He added that "Target remains in the early phases of its transformation".
Frequently Asked Questions about this Article…
Richard Goyder told BusinessDay that Target should remain a stand-alone entity because he believes there is significant shareholder value to be created in the business. He dismissed suggestions Target be folded into Kmart or sold, and said the business needs to focus on its own transformation.
Target has lost two managing directors in less than two years, including the shock departure of Dene Rogers after 15 months. The company gave no explanation for his exit, and investors and analysts believe the departures are linked to Target's recent poor earnings performance and the challenges of its transformation program.
Target's new boss is Stuart Machin, formerly Coles' store development and operations director. He is expected to review all aspects of the business, including the range of categories under apparel, fashion and general merchandise, as well as the store footprint and the overall offer.
Nomura analyst David Cooke expressed concern that moving Machin could hurt Coles just as its supply chain and store growth strategy are gaining momentum. The front-runner to take Machin’s role at Coles is believed to be Coles executive Andy Coleman, who worked with him.
In the 2013 half-year results, Target's pre-tax earnings fell 20.4% to $148 million. Over the same period, Kmart, Target’s stablemate, reported a 25% increase in pre-tax earnings. Target's full-year 2011–12 earnings were flat and included a $40 million charge for a supply chain restructure.
Wesfarmers said higher costs associated with Target's transformation plan weighed on earnings during the half. The company also stated Target remains in the early phases of its transformation, which can involve short-term pain as the business remodels its operations.
Wesfarmers and the incoming leadership have highlighted reviewing product categories (apparel, fashion, general merchandise), the store fleet and footprint, the overall customer offer, and supply-chain and operational improvements as key areas to address.
The article reports clear challenges—declining half-year earnings, management turnover and ongoing transformation costs—but Wesfarmers’ leadership says Target remains in the early phases of a turnaround with potential shareholder value to be created. Investors should note both the short-term pressures and the company’s stated plans to review categories, stores and operations.
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