Myer Between a Rock and a Hard Place

Myer’s chief is stuck between and rock and a hard place – with the retail chain’s poor performance, and then there is major shareholder Solomon Lew who has been rampant with discrediting Richard Umbers’ New Myer turnaround plan.

On Wednesday, Myer held its strategy day at a Melbourne headquarters, however, a five-hour presentation to its shareholders did little to increase shareholder confidence or value for that matter. While Myer’s share value rose a little during the morning, by lunchtime it dropped by 4 percent.

Myer’s chief executive Richard Umbers addressed investors with details around plans that included closing underperforming stores, improving merchandise, increasing online sales and plans for setting up a dedicated space where heavily discounted stock could be disposed off.

There was also talk of new in-store developments, including a new convoy of cafes and restaurants, men’s and women’s grooming services as well as a trial children’s play centre. Yet, all of this was overshadowed by the company’s weakened first-quarter sales results, which involved a 2.8% sales slump.

Umbers hung onto his five-year turnaround plan, requesting more time and asking investors to trust Myer’s executive team, pledging there will be no fudging on his efforts and responsibilities and that of his management team to turn the company around.

“I wouldn’t say that we are going to work any less hard – conditions have changed significantly and we are going to work extraordinarily hard, just as we would have done under the previous metrics that matter, and deliver the best possible result that we can,’’ said the former Australia Post CEO and ex-British Army officer in his address to shareholders.

Umbers did, however, admit that the figures on his five-year New Myer plan needed to be rehashed, which two years into it has seen major target misses.

“Two years ago when we released the New Myer strategy we did not anticipate the extent of deterioration in market conditions,” said Umbers. “Our ambition of three percent sales growth seemed appropriate at the time but it doesn’t seem appropriate now.”

“A tough external environment cannot be a reason to slow down or stop investment for the long term,” he added.

Myer conceded that whatever measures it has taken to lure shoppers, it just hasn’t been able to brave the fragile retail environment, also pointing out that consumers today want more than just shopping – they want experiential retailing, which gives credit to South African-owned rival David Jonesplans to roll out gourmet food experiences, which has already begun.

Solomon Lew, chairman of successful retail group Premier Investments and major shareholder of Myer, did not attend the address but he continued to slam the department chain following the strategy session, saying: “I only see weeds, no green shoots” in a statement that aggressively criticised Umbers’ recovery plan for Myer.

“Myer Holdings Limited has lowered its performance hurdles for the “New Myer” strategy, but left the strategy in place despite the very clear evidence that it has failed.”

Shareholders are now concerned that Myer has deserted its sales targets and there isn’t any clarity around the number of Myer stores that will be around in another three year’s time.

The retailer did, however, confirm that up to 19 stores will be either closed, downsized or undergo improved negotiation terms over the next seven years.

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