WOW ASX: CEO Brad Banducci quits Woolworths amid food price ...

“If farmers are getting less, and I’m not necessarily arguing for farmers to get less for their products, I think that that’s another issue of market power as well,” the prime minister said.

“Farmers need to be looked after but people at the checkout need to be looked after as well. And we shouldn’t have any abuse of power occurring and that’s why you’ve had such concern from the public, and I certainly understand that concern.”

But both Mr Banducci and Woolworths chairman Scott Perkins have denied that the executive shake-up was related to the increasing criticisms of the company.

“We started the process really last year,” Mr Banducci told The Australian Financial Review of his retirement. “I felt irrespective of an agreement yet, I had a year notice period, and I wanted to engage constructively within that context.”

“There has been an ongoing dialogue with Brad,” Mr Perkins said in a call with reporters. “There was no change to the timetable, no expedition at all.”

But Mr Banducci’s resignation caught the market unaware. Woolworths shares fell 6.6 per cent to close down $2.37 at $33.50. The CEO’s exit plans were disclosed as Woolworths outlined a net loss of $781 million for the six months to December 31 due to a $1.7 billion impairment already declared, largely related to the New Zealand business.

The strength of the company’s Australian food division – where sales rose 5.4 per cent and earnings grew 9.9 per cent – outweighed a fall in earnings at Big W and supermarkets in NZ. Supermarket profit margins in Australia reached 6 per cent, up from 5.8 per cent one year earlier.

Coles and Woolworths control a combined 65 per cent of the $133 billion grocery market.

Mr Banducci said shoppers were buying fewer items in categories like home care, personal care and baby goods, where there was intense competition.

“This market is unbelievably competitive, it’s an inconvenient truth, to some, but it is statistically, unequivocally, true,” he said.

Mr Banducci told investors Woolworths had not lost market share after it cut Australia Day merchandise, a decision that was met with criticism from Opposition Leader Peter Dutton, who called for a boycott of the company.

Food sales rose 1.5 per cent over the first seven weeks of this year, the slower increase “impacted by a further moderation in inflation and lower item growth”.

Mr Banducci has been credited for stabilising the business when he took over as chief executive in 2016 following Woolworths’ ill-fated move into hardware. More recently he navigated the COVID-19 pandemic and has sold off legacy assets and pushed the company into other businesses, including pet foods and products.

Competition regulator to investigate

Tom Kierath, an analyst at Barrenjoey Capital Partners, told his clients that Mr Banducci’s retirement was unlikely to be well-received given the timing of the inquiries, slowing food inflation and the cost inflation outlook.

Labor has also asked the competition regulator to investigate the supermarkets, with Mr Albanese earlier suggesting their conduct could be “an abuse of market power”.

But WaveStone Capital’s Raaz Bhuyan said the intense political debate about food prices could mean the departures of top talent from supermarkets.

“The ABC will call it a win or whatever, but it’s just rubbish. I think the bigger picture that people need to know is, losing good people from public markets.” he said. “There is a fine line about what the economy needs, and what politicians do to get re-elected.”

But, Mr Bhuyan said, Ms Bardwell was a strong performer and her appointment showed Woolworths was focused on becoming a data-driven company.

Natalie Davis, the company’s head of supermarkets, would also have been a contender for the top job, showing the strong talent from within the company, he said. Ms Bardwell has nearly three decades of experience in retail, including 23 years at Woolworths.

Jarden analyst Ben Gilbert called the executive transition a surprise that he thought was six to 12 months away. “There’s probably a bit of derating there for people who like Brad,” Mr Gilbert said, adding shares had also fallen due to the softer outlook and lower earnings expected over the next six months.

“There is also a realisation the grocery inquiry might not just be a regulatory risk, but also a risk with consumers.”