CE Suppliers Face Uncertain Future After Big W CEO Dumped
The shock departure of Big W Boss Sally Macdonald after just 10 months, could affect several consumer electronics suppliers, who under her management had benefited from increased sales of consumer electronics and appliances at the big retailer.
Distributors such as Tempo, Powermove and Laser Corporation have witnessed significant growth from Big W during the past year, after McDonald moved to expand sales of CE products.
According to sources McDonald whose contract with the Woolworths owned store was terminated following a 5% fall in revenue, a fall out with key management and the exit of key buyers.
Woolworths shares dipped on the news of Ms Macdonald’s resignation, losing 12 cents, or 0.51 per cent, after dropping to $23.24 before closing at $23.30.
McDonald who had surrounded herself with former Oroton staff has been accused of moving away from key categories to take the discount retailer upmarket.
Sources close to Woolworths suggest the retailer was confident it could fix the business six months ago but management was disappointed with its recent performance and the weak outlook for fiscal 2017 following big inventory clearances and more than $300 million in write-downs.
One bright spot has been consumer electronics which is a category that Big W excelled in for several years is growing. Several years ago, Big W was the #1 seller of Apple iPads. They were also a major supplier of games, CDs and boxed video’ and console games.
Recently Companies such as a Powermove who supply Philips headphones and Tempo who supply thousands of Polaroid UHD TV’s often on consignment have seen sales double under McDonald.
One supplier said “Past management and there has been a few were reluctant to invest in CE; McDonald did and we reaped the benefit. Past management have also been more interested in clothing and homeware despite their past sales success with CE related products.
Expectations are that Big W could be sold like what Woolworths did with Dick Smith. One interested party is believed to be the Solomon Lew owned Company Premier Investments.
JP Morgan retail analyst Shaun Cousins said any expectation that Big W could be turned around in less than three to five years was “surprising”.
“It suggests to us a lack of understanding of the predicament the business faces, moreover it likely raises further questions about the health of the business,” Mr Cousins said.
He also warned there was a risk the challenges in Big W could take management’s focus away from the core supermarket business, which was “building momentum”.
In the short term, Ms Macdonald, who led Oroton up until 2013 will be replaced by David Walker, who stepped up as chief of Woolworths home improvement division after Masters boss Matt Tyson left.
In a research note following the release of Woolworths’ first quarter sales, Merrill Lynch analyst David Errington cut his earnings forecast for the discount department store by $100 million and expressed “disappointment” over the soft outlook for fiscal 2017.
It does make you worry about the future of the business … maybe it’s just too hard to be in general retail” he said.