New Woolworths boss faces urgent to-do list

Sam Ngumeni takes over as CEO of Woolworths Holdings at the start of June, following Roy Bagattini’s decision to step down after six years at the helm of the retailer.

Bagattini’s two major achievements during his tenure were the turnaround of its South African fashion business (which operates as the Fashion, Beauty and Home segment) and the extrication of the group from its disastrous and value-destructive acquisition of the Australian department store David Jones.

While the latter was completed early in Bagattini’s tenure (late 2022, with the sales of its properties to reduce debt achieved in his first year), the former’s recovery was a more complex task and has only just taken hold.

Ngumeni will no doubt already have quite a clear idea of what he would want to focus on.

This strategy will surely be presented to the board in June or July and then, following approval, shared with investors in early September when the group reports its interim results.

Bagattini’s to-do list was, in many ways, created for him. David Jones was a mess and the pile of debt incurred in acquiring it was an unnecessary weight on the overall group, regardless of underlying performance in the core South African business.

The Fashion, Beauty and Home (FBH) business was struggling, mostly due to some large misses and own goals in its fashion unit.

While not quite a burning platform, Ngumeni also faces an urgent to-do list. Aged 57, he also does likely not enjoy the ‘luxury’ of a five-to-ten-year timeframe in the top job. Make no mistake, this is a five-year stint.

Make a call on Australia

Ngumeni and the board need to make a decision on whether to sell or retain the Country Road Group (CRG) business.

Historically, it has performed well, but an operational centralisation with David Jones and then a subsequent unentangling of the two for the latter’s sale has been incredibly disruptive.

It has implemented a new operating model at pace, which it says will allow it to fully leverage the ‘House of Brands’ strategy (CRG owns Country Road, Mimco, Trenery, Witchery and Politix).

Investors remain largely unconvinced, and there have been suggestions that its focus and capital can be better deployed in the South African business.

The Australian macro picture has not helped, with the entire retail sector under severe stress.

Still, it has managed to deliver a turnaround, with sales growth swinging positive (from -6.2% in H1 FY25 to 2.3% in H1 FY26). The adjusted earnings before interest and tax (Ebit) margin in that unit is a paltry 2.6%, with a negative return on capital employed (-2.2%).

Fend off Checkers

The competitive threat from Shoprite Group’s Checkers business is real, as this brand continues to take market share in the battle for affluent shoppers.

In the six months to end December, Checkers grew sales by 8.9% versus Woolies Food’s 7% growth.

While it is true that Woolworths is growing ahead of the market, it is still lagging Checkers.

Shoprite continues to invest heavily in the premiumisation of its Checkers store estate, with 188 FreshX-format stores at the end of 2025. The group says these are growing sales at 2.7 times the pace of the rest of its base.

The Checkers unit as a whole has 714 stores (across the namesake, Checkers Hyper and Checkers Liquorshop brands), while Woolworths has 680 Food stores (of which some are ‘inside’ full-line stores).

Last year, Woolworths opened a first-of-its-kind Food Emporium in Durbanville, with upgrades to further stores to come.

While this caters to the very top end of the market, one gets the sense that more could be done to improve the offer at its “Local” convenience stores too, particularly where these are trading in the same centres as new-generation Checkers stores.

This is a business Ngumeni knows well, having led it for the last nearly 24 months.

What will factor in Ngumeni’s plan for Food is how to counter the convenience threat from Checkers Sixty60, which all but owns the on-demand grocery delivery market.

Its own offering, Woolies Dash, is unexceptional and it either needs to double down and improve or partner with someone who can deliver on the Woolies brand promise.

Cement the clothing turnaround

The turnaround of FBH under Bagattini has been steady, with much of the work being done in its supply chain to get the right mix (product, quantities and sizes) on shelves at the right time and at the right price.

Ngumeni will understand this part of the business well, too, as he headed up its entire supply chain during his nearly three-decade tenure with the company.

Across FBH, Beauty’s performance continues to lead, with the other two categories further behind in Bagattini’s strategic journey. All three are growing profitably, but there will always be more work to be done in this unit.

The market is fiercely competitive and, while not as exposed to the Chinese fast-fashion powerhouse Shein as some rivals, the long-term threat from e-commerce is real.

Ngumeni is well incentivised to perform. He has received nearly one million shares under a “special once-off outperformance” structure. These will vest after five years, and in order to receive the full vesting of 100% of the shares, he needs to double the retailer’s share price (to R100) by June 2031.

This accounts for half of the award, with the remaining 50% being subject to targets for growth in earnings and the return on capital employed. Get all of this right, and the vested shares will be valued at R99.57 million.

This article was republished from Moneyweb. Read the original here.