David Jones said it had appointed Paul Zahra, head of stores and operations since 2003, as its new chief executive after Mark McInnes stepped down on Friday.
The chief of Australian department store chain David Jones has quit because of "unbecoming" behaviour towards a female colleague, raising uncertainty over the firm's outlook and hurting the share price.
Chief executive Mark McInnes, credited for repositioning the business as an upmarket retailer, announced his immediate resignation on Friday in a statement and gave no details. He said he would be overseas with his partner for the foreseeable future.
David Jones said it had appointed Paul Zahra, head of stores and operations since 2003, as its new chief executive. Zahra has been part of the management team at the retailer for 12 years, and before that helped set up the Officeworks retail business.
Fund managers questioned whether the company should have appointed an interim chief and conducted an external search for the top job, rather than hand the position right away to an insider.
"It is a bit of a rash decision by the board," said BT Investment Management portfolio manager Sondal Bensan.
"For a lot of people it is a bit of an unknown. That is a concern, that the decision has been made so quickly for a very high-profile position," he added.
Bensan said he expected the stock, which fetches a premium to its larger rival Myer Holdings, would lose its premium.
David Jones shares opened 4% lower and last traded down 2% at A$4.42 in a broader market up 0.4%.
David Jones, with a market value of A$2.3 billion ($2 billion), also reaffirmed its guidance for net profit growth of 5-10% for the second half of 2010 and for 2011, despite a weak retail environment amid a new mood of consumer caution.
Australian retailers have faced a tough 2010 as government stimulus spending has been wound back. Rising interest rates have also crimped consumer spending, though David Jones generally reckons its well-heeled customers are less affected by rates and are influenced more by the vagaries of the housing and stock market, which have also cooled.
McInnes, who was with the company for 13 years including seven years as chief executive, was well respected in the retailing industry for transforming its brand and guiding steady profit growth through the economic cycle.
A report on The Australian's web site said the incidents involved a sexual-harassment complaint by a 25-year-old staff member.
David Jones Chairman Robert Savage said in a statement that the woman's lawyers complained to the board about McInnes' conduct.
In a separate statement, McInnes said he had committed serious errors of judgment.
"At two recent company functions I behaved in a manner unbecoming of the high standard expected of a chief executive officer to a female staff member," he said.
McInnes was appointed to the top job in January 2003, taking over from former chief Peter Wilkinson who retired. At the time, McInnes was merchandise director for the department store chain.
McInnes joined the company in July 1997 and has about 30 years' experience in the retail industry.
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