Wesfarmers under pressure to speed up Coles turnaround

Posted by Daniel Palmer on 15th July 2008

Wesfarmers, the owner of Coles supermarkets since the $20b purchase of Coles Group last year, has disputed claims that the turnaround of the supermarket giant is taking too long.

Wesfarmers CEO, Richard Goyder, suggested that the turnaround will take about five years due to the extent of change required, and insisted they remained well on the way to achieving their goals. “In June 30 this year, we wound up our Coles integration team, which in just over seven months has completed a task, which I initially thought would take two years,” he told an Australia-Israel Chamber of Commerce lunch in Melbourne yesterday. “The scale of change required to deliver a successful transformation, or indeed the time it will take to effect it, should not be underestimated.”

“It’s an uncomfortable truth that Coles suffered from chronic under-investment in its stores and customer service in an effort to drive profit in what we believe was an unsustainable short-term way,” he added.

The recent claims that the company is taking too long to complete the turnaround appear harsh given that Ian McLeod, the recently appointed CEO of Coles, only began in May and, when he similarly advised that five years would be required to revive the ailing chain, few complained.

“I don’t think there’s going to be an individual day when people are going to suddenly see a blinding light of improvement. I think that it’s going to be a gradual transition over time,” Mr McLeod said at the time.

Mr Goyder also took the chance to query recent complaints about the state of competition in the supermarket sector. He cited ABS data indicating growth in numbers of small retailers between 2004 and 2006 to state his case that the “negative perceptions” of the impact the major retailers had on prices were baseless.