Executives at fashion and food retail conglomerate Woolworths Holdings endured a fairly polite tête-à-tête with shareholders at its AGM this week — somewhat surprising since the company’s shares have shed more than a quarter of their value over three years.
Woolies — which has operations in SA and Australasia — has long been regarded as the royal retail share on the JSE.
The stocks’ recent fall from grace might easily have spurred a more uproarious engagement at the AGM.
We believe our strategies are right, although execution in Australia may have let us down.
— Ian Moir
In fact, it was only at the very end of the AGM — dominated by questions around the sustainability report and remuneration — that a shareholder pitched a direct question around what executives were doing to restore the sagging Woolies share price.
Woolies CEO Ian Moir reassured that everything possible was being done to restore the share price — but he cautioned that it was more difficult to compete in a fast-changing retail environment.
"We want to build our business sustainably, and it will take time to get there. We believe our strategies are right, though execution in Australia may have let us down."
Asief Mohamed, chief investment officer of Aeon Investment Management, asked whether Woolies directors were still confident of the Australian strategy — which revolves around fashion retailer Country Roads Group and department store chain David Jones.
Woolies chairman Simon Susman noted that executives had recently returned from a four-day strategy session in Australia.
"We are excited by what’s happening. There’s a lot of change taking place. We believe in the strategy and we believe in [Moir] and his team."
Moir said some of the key changes at David Jones included relocating the corporate head office to Melbourne, the redevelopment of a mega-store in Sydney and the introduction of a new food offering.
In the past financial year to end-June David Jones reported a 26% drop in adjusted profit before tax to A$124m off a 1% gain in top line to A$2.2bn. The Country Road Group saw adjusted profit before tax pegged at A$95m off a 5% gain in revenue to A$1.06bn.
In the end, there was no mass show of shareholder revolt, though 18.9% voted against reappointing auditors Ernst & Young. Only 6.4% voted against the way Woolies’ remuneration policy was implemented.
On remuneration matters, Mohamed asked whether Woolies had measured the pay of the top 10% of earners with the bottom 10% over a five-year period.
Lead independent director Tom Boardman confirmed Woolies did look at salary spreads among staff.
"Companies are increasingly reporting this. We are evolving this measure, and we will be obliged to disclose it in the future."
A good deal of the AGM was taken up debating the sustainability report, which Mohamed referred to as a marketing document with "smoke and mirror" disclosures.
"I see no indication of what your target broad-based black economic empowerment levels are," he said.
Mohamed raised concerns around Woolies’ status, which slipped from level 4 in financial 2016 to level 6.
Independent nonexecutive director Pinky Moholi explained that the drop in the empowerment status reflected a change in rating of the different empowerment codes.
"Most companies in the retail sector have seen their ratings drop — some even to level 8."
Mohamed asked whether more detail could be given of how many BBBEE suppliers were used by Woolies.
He added that by increasing a supplier base Woolies would increase competition and increase profitability "for us long-suffering asset managers and our clients".
Moholi said it was difficult to list suppliers because in some instances there were confidentiality clauses.
When pushed to agree to a fuller disclosure around BBBEE procurement, Susman was reluctant to give an outright commitment.
"We will take the question and apply our minds."
Susman argued that Woolies still had a passion for driving a transformation agenda. "We have a track record of change and we will keep doing this."
Mohamed also asked if a level of complacency was setting in around sustainability challenges — a view that Moir rejected.
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