New Woolies CEO gets R100m carrot to double share price

New incoming CEO of Woolworths Holdings, Sam Ngumeni, has been awarded nearly 1 million shares in the company under a “special once-off outperformance” structure.

The 995 715 shares, acquired by the group’s share trust for R51 million, will be held in escrow for five years, after which they will vest.

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Ngumeni has been with the group for more three decades and will officially take over as group CEO on 1 June 2026 when Roy Bagattini retires.

To achieve the full vesting of 100% of the shares, Ngumeni has to ensure the group’s share price is at R100 by June 2031. This measure accounts for 50% of the award.

Along with this, he is incentivised to grow adjusted diluted headline earnings per share (adHeps) by 15% per annum (30% weighting) and ensure that its return on capital employed (ROCE) is higher than the average of the weighted average cost of capital (WACC) plus eight over the period (20% weighting).

The group says this award is “in line with its focus on long-term value creation and alignment with shareholder interests”.

Being tested at the end of a five-year period is somewhat unusual in executive incentive structures such as this. Typically, incentive shares are tested more regularly. Woolworths says the award is structure in this way “to support longer term value creation”.

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To unlock any shares in this award, Ngumeni has to achieve a threshold of “50%” across the various measures. This requires the share price to be at R80 in five years’ time, adHeps to grow by 10% per annum and ROCE to be at the average of WACC plus five over the timeframe.

In its most recent financial year (to 29 June 2025), Woolworths reported a 19% decline in adHeps, with ROCE of 16.4% (against a WACC of 12.4%). Under its previous long-term incentive structure, the group targeted adHeps growth of CPI plus 4%, with a stretch of CPI plus 10%. The ROCE target was WACC plus 7%, which based on the cost of capital at that time equated to 19.4%.

The group’s share price has been almost exactly flat over the last five years (around R50) and it is down 21% over the last three.

Over the last decade, shares are 42% lower. To achieve the targeted vesting (100%), Ngumeni will need to get the share price back to its all-time high of just over R100, reached in October 2015.

Woolworths share price

As CEO of its Food business, Ngumeni already holds shares in the group in excess of the requirement of that role (150% of guaranteed pay).

Full confidence in Ngumeni

When he takes over as group CEO, this changes to 200% from June, but he already holds more than required.

Woolworths says “the board has full confidence in Mr Ngumeni’s ability to execute effectively against the group’s strategic priorities and to deliver on key strategic and operational initiatives across the company.”

Outgoing CEO Roy Bagattini was awarded a “sign-on allocation” under its restricted share plan with a face value of R54 million in 2020. These had a staggered vesting period over five years: 25% in year three, 25% in year four and 50% in year five.

Importantly, these were “subject to the achievement of the board mandated key non-financial performance measures”. To not be measured against any financial metrics is relatively atypical for awards such as these. In years three and four, Bagattini was awarded shares totalling nearly R100 million. Last year, the final tranche vested with a value of R39 million.

Woolworths says the allocation was due to the fact that Bagattini “was based in the USA at the time with a USD denominated remuneration package and multiple share allocations that would vest in the short to medium term.

The sign-on share allocation was intended to compensate him for a value of shares that were forfeited upon his resignation from his former employer [Levis] in addition to securing comprehensive restraints of trade both in South Africa and Australia.

“Given the group’s strategic aspirations at the time, certain key strategic non-financial performance measures as mandated by the board were attached to this allocation and included in his five-year contract.”