It's never a good look when a company's CEO steps down immediately with no notice period, especially when there was no indication of their upcoming exit in the recent full-year report. So it's perhaps no surprise that shares in Greencross Limited (ASX: GXL) dropped 13.5% to close at $6.08 yesterday afternoon.
In case you missed it, Greencross' Chief Executive Officer (CEO), Mr Jeffrey David yesterday announced that he would step down effective immediately. He has been replaced as CEO by Mr Martin Nicholas, the current Chief Financial Officer (CFO) of Greencross.
Investors were clearly worried the announcement presaged even worse news, and with the recent turmoil over Slater & Gordon Limited's (ASX: SGH) accounting practices and the constant class actions against Cash Converters International Ltd (ASX: CCV) these are fears I sympathise with.
On the other hand, it's important to note that while Mr David was an experienced retailer and the co-founder of Mammoth Pet stores, he has been replaced by an equally experienced executive and company insider in the form of Mr Nicholas.
More importantly, investors who read Greencross' recent report will know of the company's plan to co-locate stores to drive revenue and capture a larger part of the market. This strategy has already been developed and put into practice, and could probably be carried out even without the key brains behind it.
On top of that, Greencross confirmed the recent outlook provided in the annual report and reiterated that the year had started strong with like-for-like sales growth of 6.3% in the first eight weeks.
So while the change of CEO and short-term share falls might be concerning, I see nothing here to worry long-term investors and believe that Greencross shares represent great value right now.
