Grant O'Brien is one of the most talented retailers in Australia, but was unable to simultaneously solve Woolworths' structural issues and steer the retailer through a difficult trading environment.

WOOLWORTHS has announced 1200 job cuts as chief executive Grant O’Brien steps down amid disappointing sales performance.

In a statement to the Australian Securities Exchange, Woolworths announced a further 800 job cuts in addition to 400 announced last month.

“We have identified additional opportunities to improve efficiency and remove outdated processes,” it said. The 1200 job cuts will affect “support functions, supply chain and non-customer facing store positions”.

The company is on a $500 million cost-cutting drive and expects to pay out $40-$50 million in redundancies this financial year.

Woolworths has launched a global search for a replacement but Mr O’Brien will remain in the role until his successor is appointed.

His departure comes as the supermarket chain attempts to lower prices and beef up its performance against intense competition from Coles and Aldi.

“The recent performance has been disappointing and below expectations,” he said in a statement. “I believe it is in the best interests of the company for new leadership to see these plans to fruition.”

Mr O’Brien has been CEO at Woolworths since October 2011.

Speaking to analysts this morning, Woolworths chairman Ralph Waters said: “Let me be clear. The recent performance of the board is extremely disappointing.”

Woolworths now expects to post a full year profit of $2.15 billion, down from $2.45 billion last year. Comparable sales across food and liquor were down 0.7 per cent in May and June.

By comparison, rival Coles lifted comparable sales 3.8 per cent in its most recent quarter.

“Australian Food is on a three-year journey to get customers to put us first consistently and our sales results will be volatile in the short term,” Mr O’Brien said. “It will take time for the improvements we have made to convert into sales momentum.”

In a statement, Mr Waters said: “I would like to pay tribute to Grant O’Brien for his commitment to Woolworths over 28 years.

“On behalf of the Board, senior management and staff, I would like to thank Grant for his ongoing contribution and for his willingness to stay at the helm until we appoint a successor.”

Mr Waters said the Board acknowledged the company’s recent financial performance had been disappointing.

Mr O’Brien’s departure follows a raft of exits from senior management. In the same announcement, Woolworths confirmed director of group retail services Penny Winn was stepping down to become a non-executive director.

“Penny will remain with us for some months to come, however, I would like to take the opportunity to thank her for her significant contribution to Woolworths and wish her all the best for the future,” Mr O’Brien said.

Jess Gill, director of customer, brand and format, left the business last month. Her departure followed that of the company’s top marketer, Tony Phillips, who left after little more than a year into the role.