2nd UPDATE: Woolworths CEO Luscombe To Retire; Replaced By O'Brien

Woolworths Ltd. (WOW.AU) Chief Executive Michael Luscombe is ending a five-year tenure at the helm of Australia's biggest retailer, passing the baton to a senior executive in its key supermarkets division.

Following months of speculation of an imminent retirement, Woolworths said Luscombe will stand down at the end of September, when he will be replaced by food and gasoline Chief Operating Officer Grant O'Brien.

It's still unclear whether O'Brien's appointment will mark a change of strategy for Woolworths, although the company's selection of a 12th internal successor may suggest that there's no dramatic change afoot. Most analysts at least agree that his work setting up a joint venture with Lowe's Cos. (LOW) indicates that Woolworths wants to grow its fledgling home improvement store offering.

Luscombe wasn't available for comment Monday and O'Brien said in a statement that he intends to "continue Michael's legacy".

Talk of Luscombe's future was sparked in February by a media article quoting him as suggesting that there's more to life than being a public figure.

A month earlier Woolworths downgraded its annual earnings guidance in response to waning consumer confidence, partly hampered by higher interest rates designed to cool Australia's booming resource sector-driven economy. Shares in Woolworths and discretionary retailers including David Jones Ltd. (DJS.AU) and Harvey Norman Holdings Ltd. (HVN.AU) have slipped substantially since October despite a gradual rise in the wider Australian market.

The new CEO will also have his work cut out resisting a resurgent Coles, which is winning back market share as a turnaround strategy initiated by Wesfarmers Ltd. (WES.AU) after it bought Coles in 2007 gains momentum.

Woolworths supermarkets boss Greg Foran was considered a likely successor to Luscombe, so investors could be a little surprised that O'Brien got the top job instead.

Still, the 49-year-old Tasmanian-born O'Brien has 24 years experience at Woolworths and currently sits on its management board.

He set up Australia's first supermarket loyalty scheme, and developed the company's liquor strategy.

O'Brien's experience setting up the Lowe's deal shows that the board is committed to the hardware store venture as the company's next growth platform, said Angus Gluskie, a fund manager at White Funds Management.

"The replacement seems to be someone who's reasonably OK with Luscombe's strategy, which suggests it's more an appointment that's going to keep things running in very much the same way," Gluskie said.

Still, one analyst from a large global investment bank noted that while Foran has experience in all of Woolworths major divisions, O'Brien's experience is mostly in supermarkets and group strategy.

"This would tend to suggest that their future growth is going to be more coming out of new business than existing business," the analyst, who wished to remain anonymous, said.

While home improvement is an obvious growth path, "it will probably extend further than that", the analyst said, adding that Woolworths could reconsider expanding overseas, given the competition concerns of local regulators.

-By Ross Kelly, Dow Jones Newswires; 61-2-8272-4692; [e-mail]