New Woolies boss bags R54m in shares

New Woolworths Holdings CEO Roy Bagattini, who took the top job on February 17, has been granted over 1.4 million shares under the group’s retention share plan (RSP). The shares were granted at a weighted average price of R37.8699 per share, with a total transaction value of R54.25 million.

The group says the vesting of these shares “is conditional upon the achievement of Mr Bagattini’s individual performance measures (IPM) and will vest over a three to five-year period”. This means he is already heavily incentivised to turn around the retailer which has two struggling operations: its core Woolworths clothing business and its Australian department store chain David Jones.

Bagattini told Moneyweb last month that: “The group is really iconic and is made up of powerful brands. Clearly there are parts that are working well and some parts that are below where [they] should be. I will initially primarily focus on two to three big areas, for example getting David Jones right and on the SA fashion business.”

Bagattini’s full ‘sign-on’ package will be disclosed in the group’s annual report to be published in August.

Given that he was headhunted from Levi Strauss in the US, this bonus is likely to be significant.

His individual performance measures will be detailed at this point too.

For the last financial year, former CEO Ian Moir’s individual performance measures were:

•    Group earnings before interest, taxes, depreciation, and amortisation (Ebitda)
•    David Jones sales and earnings before interest and taxes (Ebit)
•    Woolworths SA Fashion, Beauty and Home sales and Ebit
•    Talent management including succession planning
•    Strategy formulation, delivery to strategic focus areas, and group transformation.

Given poor group performance in 2019, his resultant vesting in terms of short-term incentives was zero.

On being appointed group CEO-elect in 2010, Moir was paid a signing-on bonus of R7.5 million, together with a once-off allocation of restricted shares to the value of R20 million. Further, given that he surrendered participation in the Country Road long-term incentive plan, the company also paid him R5.9 million in compensation.

There is no other recent precedent in the local context.

TFG Limited CEO Anthony Thunström was previously CFO of the group (and prior to that held a number of executive roles in the country), and Mr Price Group has always recruited internally (CEO Mark Blair has been with the group since 2006).

Truworths International comes closest with its brief employment of Jean-Christophe Garbino in 2015. Garbino had been CEO of French fashion retailer Kiabi since 2007, and had been with that group since 1992. Garbino held the top job for just three months. He received remuneration of R2.2 million for this tenure. He was issued with 197 473 shares under the group’s restricted share plan and 197 473 under its performance share plan. At the time, these tranches were each worth around R17 million. Garbino forfeited these shares when he resigned. However, he did receive payment of R25 million in cash “as compensation for loss of office on resignation as an executive director”.

For now, Moir continues as acting CEO of David Jones. He stepped down as an executive director of the group from February 16.

As at June 30 2019, Moir had a total of 1.969 million shares under its share appreciation right scheme (SARs) and restricted share plan (RSP). These include vested and unvested shares. Fair value of these was R34 million, calculated based on the 30-day volume weighted average price at June 30 of R47.44, with a 100% vesting probability for unvested RSP awards.

Read: Woolworths increases sales in tough environment

Moir has been criticised for his remuneration. Despite a cut in pay to R23 million in 2019 (from R30.5 million a year prior), his total earnings over the past five years since the ill-fated purchase of David Jones has been R191 million.