By Andrew Ross
The “When Life Gives You Lemons” Award
Few CEOs have been dealt a worse hand than Michael Medline had when he replaced Marc Poulin at Empire Co. Ltd. The grocery store owner had just posted a $2.9-billion writedown related to its 2013 acquisition of Canada Safeway Ltd. and Medline was facing a lot of disgruntled people: customers were upset with empty shelves and the company’s decision to replace Safeway’s branded products with Our Compliments versions; employees were upset that all head-office functions were relocated to Calgary; and investors were upset at Empire’s inability to integrate Safeway and achieve the once-trumped cost synergies. But the former Canadian Tire Co. Ltd. CEO has managed to get Empire back on the right foot. The company posted a $54-million profit on $6.27 billion in sales in Q1 2017, and had its first same-store sales growth in six quarters. Medline said it even made some small gains in market share and that investors will start to see the effects of Project Sunrise, a three-year, $500-million cost reduction plan, in the third quarter. He also promised the company wouldn’t compromise the customer experience to mitigate the effects of minimum wage increases in Alberta and Ontario.
The “Petty Cash” Award
In the grand scheme of things, Sears Canada Inc. executives’ attempt to reward themselves to the tune of $9.2 million in retention bonuses was not a make-or-break decision. That they decided this while initially filing for creditor protection, closing 59 stores and laying off 2,900 workers certainly didn’t help the optics of the decision. Nor did their subsequent efforts in trying to remove employee pension benefits. But it was certainly emblematic of a leadership devoid of any strategies to help keep the iconic retailer from bankruptcy, something it finally declared in mid-October after a last-ditch effort to sell the ailing chain fell through. According to a court document at the time the retention payments were announced, the bonuses were intended “to facilitate and encourage participation of senior management and other key employees of (Sears) who are required to guide the business through restructuring and preserve value for stakeholders. These employees have significant experience and specialized expertise that cannot be easily replicated or replaced.” One can only wonder how fast Sears Canada would have gone downhill without that so-called expertise.
The “Next Batter Up” Award
It’s hard enough succeeding a legend, but it’s even harder when you have to do it unexpectedly as Keith Creel did in replacing Hunter Harrison as CEO of Canadian Pacific Railway Ltd. five months early when the latter jumped aboard CSX Corp. ahead of his planned departure. Although Creel had worked under Harrison for 20 years, he quickly put his own stamp on CP after officially taking over Feb. 1. He held town hall meetings with employees across both Canada and the U.S., relaxed the policy on suspensions and firings, and returned the beaver and shield to CP’s logo. Such moves are a far cry from the four years of cost cutting he helped implement with Harrison, which included laying off thousands of employees and closing rail yards to return the company to profitability.
The “Final Cut” Award
Cenovus Energy Inc.’s decision to pay $17.7 billion for ConocoPhillip’s Canadian assets was one of the stranger moves of the year even to casual observers. After all, Cenovus was spun off Encana Corp. in 2009 to become an oilsands pure play and now it was becoming an all-round oil-and-gas player again. Investors certainly hated the deal, sending Cenovus shares tumbling more than 50% in the wake of the deal, which was completed in May. But CEO Brian Ferguson’s announcement one month later that he would be stepping down at the end of October was also a surprise and one viewed by some with suspicion. For one thing, his departure was announced just hours before he was scheduled to speak at the company’s annual investor day, an event where many were expected to call for his head. “The timing does scream that the market and the board is not happy with this acquisition,” LOGiQ Asset Management portfolio manager Greg Taylor told BNN. Cenovus appointed Alex Pourbaix, who spent 27 years at TransCanada Corp. before retiring last May, as CEO and president effective Nov. 6. Ferguson had planned to stay on as an adviser until the end of March.
The “Freedom’s Not Just Another Word” Award
There were plenty of guffaws when Wind Mobile was rebranded Freedom Mobile by Shaw Communications Inc., which took over Canada’s fourth-largest cellphone carrier in 2016. The brand certainly needed some new life after a chequered history that included several management changes, several marketing strategies and a failed $700-million takeover bid by U.S. giant Verizon Wireless. Shaw also stated that it didn’t want to continue licensing the Wind brand from Netherlands-based Veon Ltd. In its final quarter of 2016, Shaw added only 9,500 new subscribers compared to the 30,000 analysts expected, and then added 20,000 more in Q1 2017, though analysts had predicted 28,000, bringing its total up to 1.1 million. On the other hand, average revenue per user rose to $37.05, from $36.30 a year earlier, as customers switched to the premium handsets on the new LTE network that Shaw is deploying ahead of schedule. That figure is well below what the Big Three earn, but things may be looking up for Wind, er, Freedom.
The “Baked Twice” Award
CEOs don’t often resign in the midst of a strategic review and an ambitious $300-million cost-cutting Transformation Plan, but Hudson’s Bay Co.’s Jerry Storch did just that at the beginning of November. The veteran retail exec on Oct. 20 announced he would step down after almost three years at the helm to return to his consulting business. His successor, albeit only on an interim basis, is his predecessor, Richard Baker, who is also the Bay’s executive chairman and a well-known real estate investor, knowledge that is likely useful as activist Land & Buildings has been pushing the retailer to spin off its property assets. Land & Buildings values Hudson’s Bay’s real estate at $35 a share, which was more than three times the retailer’s share price in early November.
The “Eat My Shorts” Award
Several Canadian companies have wilted in the face of short selling this year and Shopify Inc. certainly seemed poised to join that list when Andrew Left of Citron Research on Oct. 4 in a video called the online retail platform’s business model a “get rich quick scheme” and one that contravenes U.S. Federal Trade Commission rules. Shopify’s shares predictably nosedived 11% that day in the midst of a three-day 21.9% plunge. But Shopify and CEO Tobias Lütke came out swinging. The company the next day posted a vigorous defence of its business model to its website, and Lütke weighed in a week later. “The irony of an outfit like Citron accusing any business of being a get-rich-quick scheme should not be lost on anyone,” he tweeted on Oct. 10. In another tweet, he called Citron a “short-selling troll.” Investors seemed to agree, pushing Shopify’s stock back up about 19% before its earnings call on Oct. 31. Left continues to maintain his criticism of Shopify is valid, setting up a battle that seems likely to linger as the company reported revenue increased 72% to US $171.5 million in its most recent quarter.
The “Doubling Down” Award
Owning a Tim Hortons franchise has long been a near-surefire way to make money, but things haven’t been so hot for the doughnut chain since 3G Capital-backed Burger King acquired it for $11 billion in 2014, forming Restaurant Brands International Inc. in the process. So upset are Canadian franchisees that about half of them have joined the dissident Great White North Franchisee Association, which was created in March to help restaurant owners frustrated by the elected franchisee board’s failure to address their complaints. The association in October filed an $850-million class action lawsuit against Restaurant Brands, naming CEO Daniel Schwartz as one of the defendants, alleging it is trying to intimidate franchisees. “Since the time of the corporate takeover of Tim Hortons, the relationship between Tim Hortons and its franchisees has become more adversarial than amicable,” says the statement of claim filed in Ontario Superior Court. It was the second lawsuit filed by franchisees against the company, following a $500-million class action in June alleging mismanagement of an advertising fund and rising costs.
The “Foot in Mouth” Award
The technology industry has been under fire for quite some time about its lack of gender balance and sexist behaviour — real or perceived — but Hootsuite CEO Ryan Holmes didn’t do anybody any favours when he told a Bloomberg reporter to call him after a critical story appeared about the social media management company. The story, Hootsuite: The Unicorn That Never Was, questioned the company’s $1-billion valuation — giving it “unicorn” status — prompting Holmes to tweet out a number for the reporter to call. Turns out, the 1-800-328-3425 number provided was a sex hotline, which you would only know if you used an alpha keypad since it translates to 1-800-EAT-DICK. Holmes later apologized and deleted the tweets, but nothing ever truly disappears in the digital age, as he should know all too well. To his credit, Holmes expanded on his mea culpa on CNBC’s Life Hacks Live series: “I think the elephant in the room for so many of these leaders is what happens when you screw up, what happens when you mess up,” he said. “And the lesson I learned out of that is that when you screw up and you actually need to apologize, you apologize, you be transparent. You talk about how you’re going to remedy it if you need to, you own it.”
The “Power Play” Award
Governments bending over backward to give billionaire sports team owners handouts to build new facilities have become the norm in North America, and Calgary is no different. But the city and Mayor Naheed Nenshi may not have bent enough. The NHL Flames want a new $555-million hockey arena to replace the 34-year-old Saddledome and they want the city to fund a big chunk of it or else they might just skedaddle out of town. “There would be no threat to move, we would just move, and it would be over,” Ken King, CEO and president of Calgary Sports and Entertainment Corp. — which oversees the Flames, the CFL’s Stampeders, the WHL’s Hitmen and the Roughnecks lacrosse team — said during a radio interview on April 1. “And I’m trying my level best to make sure that day never comes, frankly.” The city has agreed to pony up $185 million in cash and benefits. The group’s initial proposal also asked for the city to cover the cost of flood insurance, reimburse provincial property taxes imposed on the facilities, and pay for a public gathering place next to the arena that would be suitable for festivals. To be fair, the group’s proposal isn’t out of line with what cities such as Edmonton and Detroit have acquiesced to recently, but no deal has been struck so far. King on Sept. 12 said talks with the city have been called off.