Rob Scott is ready for a breather.
Wesfarmers’ eighth chief executive is looking forward to some holiday downtime with his family after a first year at the helm that arguably ranks as one of the busiest in the company’s 104-year history.
“I’m really pleased with what we’ve been able to achieve as a team,” Mr Scott said from Wesfarmers’ Perth offices overlooking the Swan River.
“When we kicked things off a year ago, we really didn’t expect that we would have undertaken as much change as we have.”
There has been the hectic run of asset sales, including Wesfarmers’ coal mines and the Kmart Tyre & Auto business, which have brought in more than $2.3 billion.
But if Richard Goyder’s tenure at Wesfarmers was marked by the $19 billion purchase of the Coles businesses in 2007, Mr Scott’s first year will be remembered for the decisions which have effectively reined in his predecessor’s legacy by hiving off the Coles supermarkets and aborting Bunnings’ increasingly costly push into Britain.
Mr Goyder isn’t taking it personally, this week describing his relationship with Mr Scott as “seamless”.
“Life for a new chief executive is pretty tough because expectations are high,” Mr Goyder told a WestBusiness function.
“People are always comparing you to others, they certainly did with me and Michael Chaney.
“And some of the important things about being CEO is being strong when you need to be and being really clear with markets, and I think Rob was.
“I think he has done an amazing job in his first year.”
The demerger of Coles, completed just two weeks ago, cut loose $40 billion in sales and refocused Wesfarmers around Bunnings, Kmart, Target and Officeworks and a collection of industrial businesses across fertilisers, chemicals, retail gas and workwear.
“Some companies want bragging rights about being big, whereas we want bragging rights about shareholder returns,” Mr Scott said.
The demerger was already “very much on my mind” when he took the reins from Mr Goyder at Wesfarmers’ annual meeting in November, 2017.
“I did believe the demerger would set both Coles and Wesfarmers up for the future.
“While Wesfarmers has had a degree of success over the years, what good looks like today isn’t going to be good enough for the future.
“We couldn’t rest on our laurels.”
The Coles spin-off has also freed up time for Wesfarmers management to focus on other businesses and acquisitions.
“There’s still a fair bit to tie down … but I’m looking forward to life post-demerger,” Mr Scott said.
“Although the key reason for demerging Coles was very much a financial decision for the longer term, there is a certain opportunity cost for owning a business like Coles and that is the amount of time as a corporate office we all need to spend on the business.
“So I think it accounted for more than half of my time.
“And I’m sure if you went back to Richard during the turnaround years of Coles it accounted for 80 per cent of his time.
“So obviously it frees up time to focus on our existing businesses and new opportunities.”
Analysts expect Wesfarmers to use the $10 billion of firepower at its disposal to expand its existing industrial businesses or add new ones, or return cash to shareholders via a share buyback or special dividend.
Some companies want bragging rights about being big, whereas we want bragging rights about shareholder returns.
Inevitably, there is always speculation — some of the rumoured targets are ridiculously far-fetched — that Mr Scott is lining up a major purchase.
But while the former Olympian has been careful to temper expectations, he also believes “a lot of people” underestimate the opportunity still offered by Wesfarmers’ existing businesses.
And that includes Bunnings, which now accounts for more than 50 per cent of Wesfarmers’ post-Coles profit.
Investors fret the hardware juggernaut is facing a dangerous slowdown given the declining east coast housing market.
Just yesterday, Morgan Stanley questioned Wesfarmers’ “rich” share price given Bunnings “is exposed to the precipice of a housing downturn”.
“Whilst we acknowledge Bunnings’ outstanding long-term track record in Australia and New Zealand, the record has been achieved during a more than 20-year housing super cycle, which has driven returns and earnings at Bunnings for over 15 years,” Morgan Stanley.
Mr Scott, however, insists Bunnings still has a lot of scope to grow, both via more store rollouts and range expansion into categories such as home automation and assisted living.
“I’ve spent a bit of time offshore recently and seen how progressive (US giant) Home Depot is in the e-commerce space and the commercial space, so I see another 10, 20 years of opportunity for Bunnings in those areas.” he said.
Then there is the prospect of shaking up other Wesfarmers businesses by taking advantage of their untapped competitive advantage.
Mr Scott cites Kleenheat, a relative minnow in the industrial division, as “a great example of what we can do when we turn our mind to it.”
Kleenheat, which was founded in the 1950s to supply LPG to farmers and country communities reliant on kerosene, has grabbed more than 25 per cent of WA’s retail gas market since taking on Alinta five years ago.
Some analysts worry about Wesfarmers’ immediate prospects given comments at the annual meeting two weeks ago that short-term profit growth may fall short of analyst expectations as it looks for new long-term investments.
Mr Scott says the group will nonetheless stick to “who we are and what we do”.
“Part of our job as CEOs and leaders is not to get caught up in the latest group think and stay focused on strategy,” he said.
“If you ran your business based on all the advice everyone gave you, you wouldn’t be successful.”