Steinhoff tumbles

Whoa! Last night Steinhoff announced that Markus Jooste has stepped down as CEO (Steinhoff announces investigation into accounting irregularities and resignation of CEO), with Dr Christo Wiese taking up the role of Executive Chairman on an interim basis.

The bigger problem though is the new accounting irregularities that have come to light and the possibility that they may need to restate prior years' financial statements. The result is that the audited financials have now been delayed indefinitely.

Jooste joined Steinhoff in 1988 and became the group's CEO in 2000. He is a Steinhoff lifer, and only 56 years old. So for him to be asked to step down, the new irregularities found are not around the subjective interpretation of tax laws, it will be something far more significant.

The saving grace for the company is that they have Wiese to take the reigns and the old Pepkor CEO, Pieter Erasmus will be assisting.

As the Buffett saying goes:

"In the world of business, bad news often surfaces serially: you see a cockroach in your kitchen; as the days go by, you meet his relatives"

One of the reasons we owned Steinhoff was because of the management's ability in sweating their assets. That has now changed, management has turned out to be a liability. The stink of the current scandal will probably hang around the company for years to come. You need to ask yourself, what will the company look like when this finally blows over? Will their huge store base still be relevant in an age of online shopping? We have been wrong in owning Steinhoff, expect more details on the matter later today.