WOOLWORTHS chairman Gordon Cairns has cemented his authority on Australia's largest retailer before a fiery annual general meeting this week by appointing its most successful chief executive, Roger Corbett, as an adviser to the board.
Mr Cairns has overcome resistance inside Woolworths' management team to invite Mr Corbett to return to the company he ran for seven years, as a mentor to senior executives and an adviser to the board on the company's performance and business improvement opportunities.
Mr Corbett's appointment, which was first revealed by Fairfax Media last week, is likely to ease the concerns of institutional and retail shareholders who fear the company has lost its way in recent years and completely underestimated the threat from Coles and Aldi, leading to a slump in sales and earnings in its core supermarkets business.
This year several Woolworths shareholders and former Woolworths chairman John Dahlsen called for Mr Corbett to be appointed chairman, saying the company needed a "circuit breaker". They pointed to Wesfarmers' decision to invite former CEO Michael Chaney to join the board and succeed chairman Bob Every.
However, at the time the suggestion was met with strong opposition from several board members and senior executives. Mr Corbett consulted to Woolworths for five years after retiring as chief executive in September 2006 but was under-utilised by then CEO Michael Luscombe.
Mr Cairns, who took the helm from Ralph Waters on September 1 after a series of profit downgrades, now has effective control of the board after the departure of three non-executive directors in recent months.
Mr Cairns worked with Mr Corbett during his time as chief executive of Lion Nathan and, like many shareholders, believes he can help the company restore the winning culture that fuelled more than eight years of strong double-digit profit growth between 1999 and 2007.
"Roger Corbett is uniquely placed and eminently qualified to provide insight and advice to both the board and senior management at this particular time in Woolworths' transformation," Mr Cairns said on Monday.
"The board is delighted that Roger has made himself available and looks forward to working with him."
Woolworths shares jumped 92¢ to a four-week high of $24.63 after the appointment was confirmed.
Mr Corbett, 73, who retired as chairman of Fairfax Media in August, is due to step down from the Reserve Bank board and the board of United States retailer Wal-Mart at the end of this month. His new role at Woolworths starts on December 1.
Mr Corbett has more than 40 years' retail experience, including 30 years at Woolworths. As managing director of Big W between 1990 and 1997, Mr Corbett restored the discount department chain to profitability by adopting Wal-Mart's everyday low-prices model.
As chief executive of Woolworths from 1999 to 2006, Mr Corbett presided over the strongest growth in the retailer's 80-year history, lifting sales from $18.5 billion to almost $35 billion, net profits from $257 million to more than $1 billion and its market value from $6 billion to more than $22 billion.
He engineered more than $4 billion in acquisitions, including the $1.3 billion takeover of hotel and gaming group ALH, which made Woolworths Australia's largest liquor retailer, and the $2.4 billion purchase of Foodland's New Zealand grocery business.
He championed major IT, supply chain and logistics reforms that delivered cost savings of more than $5 billion, and perfected Wal-Mart's "double-loop" strategy, taking costs out of the business and sharing the bulk of savings with customers in the form of lower prices to drive volumes and sales.
Since Mr Corbett's departure, Woolworths has moved away from this strategy, allowing gross margins and EBIT margins to fatten rather than investing efficiency gains into prices.
Outgoing chief executive Grant O'Brien admitted in May that the company had erred by putting profit growth ahead of customers, and has flagged plans to invest more than $600 million into reducing grocery prices and improving service in stores.
Fund managers applauded Mr Corbett's return, although some said it could make life difficult for new food group managing director Brad Banducci, a potential CEO candidate.
