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 said Target should remain a stand-alone business within Wesfarmers, arguing there is “a lot of shareholder value to be created” by keeping Target separate rather than folding it into Kmart or selling it.
Target announced the surprise exit of Dene Rogers after 15 months as managing director with no public explanation. The article notes investors and analysts believe his departure may be linked to Target’s recent weak earnings performance, which raises short-term leadership and execution concerns for investors.
In the 2013 half-year result Target’s pre-tax earnings fell 20.4% to $148 million. Target’s full-year earnings for 2011–12 were flat and included a $40 million charge for a supply-chain restructure. Wesfarmers said higher costs tied to Target’s transformation plan weighed on the half-year earnings.
Over the same 2013 half-year period referenced in the article, Kmart—Target’s stablemate—reported a 25% increase in pre-tax earnings, highlighting a clear performance gap between the two retail chains.
Stuart Machin, formerly Coles’ store development and operations director, was appointed to lead Target. He will review all aspects of the business including category ranges across apparel, fashion and general merchandise, plus Target’s store footprint and related operations.
Nomura retail analyst David Cooke expressed concern that taking a key operator like Machin out of Coles could create a bigger hole at the supermarket chain just as its supply chain and store growth strategy were gaining momentum. The article also mentions Andy Coleman as a possible front-runner to replace Machin at Coles.
Wesfarmers described Target as being in the early phases of a transformation that has involved supply-chain restructuring and higher costs. The article highlights that transformational change can produce tough short-term results, so investors should expect potential volatility while the plan is implemented.
Based on the article, investors should monitor Target’s upcoming earnings results, progress on the transformation and supply-chain changes, leadership appointments (such as Machin’s actions and any Coles replacements), and comparative performance versus Kmart—these factors will signal whether Target’s stand-alone strategy is creating shareholder value.
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