Former Country Road boss John Cheston – who departed in September after just 10 weeks in the job – has launched Federal Court action against the retailer, claiming he was misled about the company’s financial state.
Cheston, who was previously the head of Singapore’s biggest listed retailer and a long-time executive at UK icon Marks & Spencer, was appointed in March and started work on 1 July at Country Road.
Just three weeks into the job he made headlines when he announced a profit warning about the retailer’s outlook. But on 13 September the company announced he was gone, with chairman Simon Susman citing “irreconcilable differences with the board over the future direction of the company” for the dumping.
Country Road announced late on Friday that Cheston had launched Federal Court action “arising out of the cessation of his employment with the company.”
According to a report by Fairfax Media, Cheston will allege that the company engaged in misleading and deceptive conduct in that it misled him about the strength of its financial position.
Country Road has denied the claims.
“The claims made by Mr Cheston are denied and will be vigorously defended. Our defence, which will respond to the claims and will deal with the reasons for the cessation of Mr Cheston’s employment, will be filed with the Court in due course.”
The lawsuit continues what has been a difficult year for Country Road.
On top of Cheston’s departure, the company has been hit hard by deteriorating retail conditions, with net profit slumping 21.2% in 2009-10 to $12.3 million.
In his address to last week’s annual general meeting, Susman said retail conditions were expected to remain difficult until Christmas.
Total Country Road sales were up 5.1% in the September quarter, but retail sales fell 4.7% in Australia.
Former chief executive Ian Moir is now running the company from South Africa while a replacement for Cheston is sought.
James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
