Dreamworld: How not to handle a crisis

SCEO Deborah Thomas speaks to the media at the Ardent Leisure Annual General Meeting on October 27, 2016 in Sydney, Australia. Photo / Getty

Ardent Leisure's handling of the Dreamworld tragedy is turning into the go-to case study of how not to manage a crisis.

The death of four holidaymakers on the Thunder Rapids rise is of course primarily a tragedy for those individuals and their families. This is a fact that Ardent Leisure chief executive Deborah Thomas and chairman Neil Balnaves appear to have lost sight of.

From the outset, Ardent Leisure botched its response.

Firstly, it appeared to not have a plan in place and ready should a tragedy like this occur. This is a huge failing on the part of the board and management. It is almost unbelievable that no one ever asked: how prepared are we if there's an accident?

Then the company decided to go ahead with its annual general meeting, just two days after the tragedy. The company insisted it had not choice because it was a statutory meeting that could not be cancelled. There are ways around that.

Next it persisted with paying Thomas a bonus of more than A$800,000 and refused to discuss whether she should still receive this, with Thomas saying now wasn't the time to be discussing the transaction. Yet the company seemed happy enough to discuss how the tragedy might affect earnings.

Worst of all, however, was Thomas' insistence that the company had contacted the victims' families, only to discover during a press conference that it hadn't, thanks to a text message from a furious family member to a journalist at the press conference.

Thomas should have been the one to make contact individually, and her excuse that they had been trying to find the phone number was pathetic.

There is, in reality, little a company can do to ease the grief of families in these situations, but Ardent Leisure's actions certainly didn't help.

Furniture dreams turn sour

Australian online furniture retailer Temple & Webster had big ambitions when it floated on the share market last December.

"The company's vision is to be Australia's most beautiful shopping experience for the home and the first place Australians turn to when shopping for their home," the company said in its prospectus.

Nearly a year later, and those dreams have soured, at least for the unfortunate investors who bought into the company's float.

Shares purchased at $1.10 have fallen as low as 12c as the company continued to bleed money and missed its prospectus forecasts.

In its prospectus, the company pinned its hopes on online sales growth: "Temple & Webster Group believes there is an opportunity to grow its share of the total furniture and homewares segment as well as benefiting from the natural growth and shift from offline to online retail."

Now the company has discovered that consumers like to go and look at and touch - and perhaps sit or lie on - furniture before they buy it. It's something anyone who has ever bought a couch or a bed could have told them.

So the online retailer has decided the way to boost sales is through physical shops. It already has one "pop-up" store in Melbourne and will open a similar one in Sydney.

Investors might be tempted to ask why the company founders and shareholders felt it appropriate to float Temple & Webster when it didn't have a proven business model.

Perhaps they shouldn't have been surprised. Founder and chief executive Mark Coulter told the Australian Financial Review in August that when he and his partners started the business five years ago: "We didn't really know anything about homewares and furniture," he said.

"But we saw a market opportunity, we saw a way to do things differently and change the way people shop online."

So much for that.

By last week, the story had changed a little. "I think the Temple & Webster brand has the potential to change the way people shop offline as well as online," said Coulter.

In fact, according to Power Retail, the furniture and homewares market is worth A$12.6 billion, however only 4 per cent of sales have migrated online.

The company reported bottom-line losses of A$44 million in the year to June 30 and lost A$14.8 million before interest, tax, depreciation and amortisation - almost twice the A$8.5 million loss forecast in its prospectus.

The other puzzling aspect about this company's performance in the wake of the float is why it is cutting costs - or more precisely why there are costs that need cutting in the first place.

The company said "key metrics" had improved after it slashed head office, advertising and logistics costs. But how, after less than a year on the stock exchange, had these costs accumulated to the point that they could be "slashed"? Investors will be wondering what sort of shape the company was in when it floated and whether it was fit to be listed in the first place.

Temple & Webster says it remains committed to breaking even in 2018 as it promised in the prospectus, but whether investors believe them will be another matter.

HOW NOT TO MANAGE A CRISIS