Massmart CEO stepping down after year-long share price decline

The Walmart acquisition of Massmart was a slow and painful affair. Protracted competition issues and ministerial interference slowed the deal, and South African labour unions were distinctly unwelcoming. And as it's turned out, it hardly seems worth all the effort. Walmart paid R148 a share for Massmart, and the share hit R200 in the wake of the deal, but has since slumped to R134. Sales have grown only modestly, and 2013 operating profit actually fell 5% – a disappointing performance. Now comes the news that Grant Pattison, who has been at the helm of Massmart for the last seven year, will be stepping down. Massmart shares fell on the announcement, and although Pattison assured Alec Hogg that his decision to leave was unrelated to the company's recent performance, it is suggestive timing. Massmart is a solid business, but it may take some time for the Walmart to see the kind of results it was hoping for. – FD 

ALEC HOGG: Massmart Chief Executive Grant Pattison has resigned after 7 years as CEO and much longer with the company, he joins us now on the line. Well Grant, you were looking a little pressurised the last time we saw each other, and now you've decided to go take it easy. Was it your choice or theirs?

GRANT PATTISON: Couple of things, I haven't decided to take it easy, I'm just changing jobs, I'll be looking for a new opportunity in a leadership position in a different industry. It was a completely selfish decision, I wanted to try something new.

ALEC HOGG: But Grant you've only really just ushered in the Walmart guys. We do know the American bosses are tough, we also know your share price is down a third in the past year, was there pressure from them?

GRANT PATTISON: Not at all, Walmart and I have a very good relationship and they were certainly encouraging me to stay.

ALEC HOGG: So what next? When you say you want to move to another industry.  You've grown up in this sector virtually. Run a massive company for the last 7 years, what makes you feel you can switch now? 

GRANT PATTISON: Well, this is my second industry, I started off in mining, I'm actually an engineer by training. So I did 6 years in mining, and you're right, I devoted a good portion of my life to the retail industry. I feel like I've had an impact there and had the privilege to lead a great company. If I'm going to work at any company in the retail industry it would be at Massmart. I'm 43 and I think I've got enough years in me to give this another chance. Step into the void as you might say.

GUGULETHU MFUPHI: Grant, at 43, you are considerably young. You've done mining, you've done retail, which sector are you looking to step into?

GRANT PATTISON: I have no idea. I've done nothing but think about Massmart and retail for the last 16 or 17 years. My next focus will be to ensure the smooth and effective handover to Guy Haywood the new CEO and then I'll allow myself some time to think about the next step.

ALEC HOGG: Simultaneous with the resignation of your mentor, Mark Lamberti.

GRANT PATTISON: Yes, unfortunate that. I think both him and I would have preferred to have the timing departed. But you know events happened. And he pursued opportunities elsewhere. And I understand that he wanted to take that up. Our desire would have been to separate it more.

ALEC HOGG: Imperial is a different industry, will you be joining Mark over there?

GRANT PATTISON: No, I wont be joining Imperial.

ALEC HOGG: So, you're 43, goodness. I thought you were a little bit older than that. Will you be taking a little sabbatical to catch your breath first? Before doing anything else?

GRANT PATTISON: No, no need for a sabbatical, we live balanced lives at Massmart. No need for a break, I really want to focus on making sure that the transition is right, and then I'll immediately look for a new opportunity.

GUGULETHU MFUPHI: Grant, the share price performance of Massmart in the last year has been rather modest, are you happy with the value that you have managed to create at the company.

GRANT PATTISON: Certainly, if you go back and do that analysis since I've joined I'm comfortable with all the metrics, perhaps profit has under-performed a bit, which I must take responsibility for. Overall I'm happy with what I did with the company. From the outside it's tempting to measure just the financial metrics, but I think the relationships and the impact that you can have on a company is much deeper than that and I'll let history judge how I did.

ALEC HOGG: And you did tell us during the transition from the previous independent owners to ownership by the Americans. That what you learnt from the Americans suggested that we were a long way behind in South Africa. How far have you been able to catch up at Massmart since doing that deal?

GRANT PATTISON: In that respect I'm actually quite pleased with what we've done, we're almost there on e-commerce, I think Massmart sells more items online now than any other retailers in SA between Dion Wired and Makro. So I think we've caught up there, and before the end of the year, we'll do some more catching up. The supply chain, I think we have got the world class VCs and world-class systems that run the VCs. I think where we've still got a lot of catching up to do, is in extracting productivity out of the business, about the returns per square metre and returns per labour hour. That's where we're far behind and I think you're going to see the focus on the operational and performance metrics coming from Guy's side.

ALEC HOGG: Are you going to hold onto your Massmart shares?

GRANT PATTISON: I'm definitely holding onto the Massmart shares for the rest of the year.

ALEC HOGG: Because they've come a long way down from R200 a share to R134 at the moment, would you see them as an extreme value opportunity at the moment or was that a run up to R200 part of the retail bubble?

GRANT PATTISON: My Massmart shares are bit more emotional than that, so I'll have to get rid of some as part of the Massmart share scheme as I exit at the end of the year. But my attachment to them is emotional; I have huge faith in the company going forward and will probably remain a long-term shareholder.

ALEC HOGG: This has been a shock to us and to most of the market generally. The share price of Massmart has declined as a result of the announcement. Was it a shock to the board and to the employees?

GRANT PATTISON: I can't say if it was a shock to the employees, but I don't think it was a shock to the Massmart board, they know me well and they know that for me, doing the same job for 7 years is a stretch.

GUGULETHU MFUPHI: Grant your thoughts on your successor?

GRANT PATTISON: I have a huge amount of confidence in Guy, he has been with the business for almost as long as I have. He's been the CFO and the COO. Another good example of how succession should be worked. He has the support of the board and of all the management team. And I know the other shareholders, another great example of succession planning.

ALEC HOGG: We wish you all the best Grant, the outgoing CEO of Massmart.