Executive Insights

The new Woolworths CEO may get R54 million in shares - but he has his work cut out for him

Business Insider SA
NEW YORK, NY - NOVEMBER 15: EVP & President of Am
The new Woolworths CEO, Roy Bagattini. (Photo by Dave Kotinsky/Getty Images for Levis),
  • If the new CEO of Woolworths achieves his performance targets over the next three to five years he stands to receive 1.4 million shares.
  • Roy Bagattini has his work cut out for him, though.
  • The group's profit has taken a knock due to its struggling Australian department store chain David Jones - and weak sales of local Woolworths clothing.
  • For more stories, go to Business Insider SA's home page.

Roy Bagattini, the new CEO of Woolworths, could receive more than 1.4 million Woolworths shares in the next couple of years if he achieves the performance targets set by the company.

The company announced on Monday morning that the shares – worth R54.3 million when they were issued - will be transferred to Bagattini depending on whether he achieves certain performance targets over the next three to five years.

For Woolworths’ previous CEO, these included profitability targets for the group, as well as sales growth at Woolworths and its Australian department store chain David Jones. Ian Moir also had targets for “talent management”, succession planning and strategy as well as the “transformation” of the group.

While Moir received a salary check of R23 million last year, he didn’t receive shares as these targets were not achieved. In the previous year, however, he received almost R7 million in shares – in addition to pay of R30 million.

In total, over the last five years before he stepped down, Moir pocketed R191 million - despite spearheading an ill-fated foray into Australia.

Moir championed the acquisition of David Jones in 2014 for more than R21 billion at the time. But the group has since been forced to write off billions and continued investment in the underperforming David Jones has also increased the debt burden on the local company, which has now ballooned to almost R13.3 billion. Its share price has lost almost 20% since the start of the year.

In the half year to 29 December, Woolworths’ headline profit fell by almost 18%, and  sales continued to fall at David Jones.

While Woolworths food sales in South Africa climbed by 8%, local clothing sale disappointed. "Womenswear underperformed  as a result of some product failure, a lack of newness in summer and higher price points, which also impacted sales and volumes,” the company said.

Fortunately, Bagattini knows something about clothing.

Read: What you need to know about the new Woolworths CEO, who's from Joburg and runs Levi's in the US

The 55-year old, who hails from Johannesburg and started his career at SA Breweries,  previously ran Levi Strauss in the Americas (including the US), which brought in half of the company’s income, or around $3 billion (R40 billion, at current exchange rates). Still, his new job will be a large step up: Woolworths turnover amounted to more than R78 billion in the past year.

But he earned much more than Moir - according to Salary.com, Bagattini earned $3.97 million in 2018 (R63m at current exchange rates) - which included shares and a bonus.

Bagattini has been in his new job for two weeks, and has already had a visit by the minister of trade and industry Ebrahim Patel. 

He is also having to deal with his first crisis: the impact of the coronavirus on its imports of winter clothing from China. 

The group told Business Insider South Africa that clients can expect "stock gaps" from mid-March.

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