Goyder joined Wesfarmers in 1993 and was appointed managing director in July 2005. In 2007, he orchestrated the biggest transaction in Australian corporate history when Wesfarmers bought Coles Group for $19 billion.
After the acquisition, Goyder says one of his first tasks was to mend the group’s broken supply chain. He says that under previous management, divisional leaders were unable or wouldn’t take responsibility for their supply chain because the functions were centralised and shared between the different businesses. So there would be gaps on shelves. Coles shoppers were unable to buy some products because they hadn’t been delivered.
“So when we went in, we disbanded those centralised functions pretty quickly,” Goyder says. “The board made each division accountable for their own supply chain, IT and human resources. Now, each business in Wesfarmers is a day-to-day autonomous operating unit.”
For the year to June 30, 2012, the Coles division (food, liquor and petrol retailing) posted earnings before interest and tax of $1.356 billion, an increase of 16.3 % on the previous year. It generated a 6.4 % increase in revenue to $34.117 billion. Bunnings EBIT rose 4.9% per cent to $841 million and it lifted revenue by 5.6 % to $7.162 billion.
Goyder says a stronger and growing Coles is a response to refurbishing stores, a more efficient supply chain, the introduction of self scan checkouts, an improving fresh food offer and better management. He says the company is competitive on price, claiming to have reduced food bills for its customers who responded to its “down-down” and “dollar dazzler” marketing campaigns.
However, Goyder was disappointed in liquor performance and acknowledged Dan Murphy’s, owned by Woolworths, was a “very good business”. He says while Liquorland was performing well, its First CHOICE Liquor chain had suffered from having too many stores in the wrong locations. Also, a systems implementation a year ago took longer than expected, causing inventory problems.
“And, of course, if you lose sight of your inventory, you’re in a bit of strife,” he says.
Retailer Target’s EBIT for 2012 fell by 12.9 % to $244 million.
“Maybe we got a bit stale here,” Goyder says. “It’s a fashion business and you have to be ahead of the game. The business hadn’t done enough with its online strategy – we are now.”
The group’s insurance division was hit hard from natural disasters, particularly the Christchurch earthquake. EBIT fell by 75 per cent to $5 million.
Goyder says Wesfarmers plans, develops and executes strategies for the long term – between 10 and 20 years. According to Goyder, the results show there’s plenty of room for improvement in each division.
“We focus on running our existing businesses better,” he says. “Where divisions are making a decent return, we look to invest in them. And then we manage and sustain the portfolio.
“Because we’re a conglomerate, our strategies are very broad and we are financially disciplined.”
Goyder says the Coles strategy is about improving the shopping experience.
“We had to improve the feel and look of the stores so we refurbished,” he says. “We have done about 250 stores, so there’s still about 500 to go.
“We improved staff capabilities. We want store managers to engage more with customers. That’s how you learn. And we had to get the value right to attract customers.”
He says underperforming stores will be closed and bigger ones will open – but only when it makes “commercial sense”.
“I think one of the things you have to do as an MD or CEO is to make sure there’s enough time to think,” Goyder says. “You can be busy, but you need time to think, because one of your key roles is to ensure the strategy for the group, out 10-to-20 years, will help the organisation over that time.
“I think strategy is one of those things you can sometimes muse about yourself. I do it when I’m jogging. But it’s important to have smart people around you at board and operating management levels. People who understand strategy and capacity.”
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