How bad are things for Myer? This bad.

Photo: Sam Tabone/WireImage

  • Australian department store retailer Myer’s future is unclear after its CEO was dumped yesterday.
  • It follows horrendous sales numbers over the Christmas period.
  • It adds to the havoc in the Australian retail sector where Amazon is only getting started.

Garry Hounsell, the lifelong accountant who has suddenly found himself running the last great Australian-owned department store company Myer, is quoted today as saying he doesn’t think the company is going to collapse.

“I don’t believe there is any risk of going into administration at this particular time,” he told The Australian’s Eli Greenblat after CEO Richard Umbers was dumped following yet another tawdry set of trading results.

It is a telling scenario when on your first day as CEO you’re saying you don’t think the company is going to go down the gurgler “at this particular time”.

Hounsell, Myer’s chairman, had said repeatedly over recent months he was “impatient” to see results flowing from Umbers’ “New Myer” strategy. That patience ran out after the last set of results, which were a horror show.

Here are some of the lowlights from its trading update from last week (emphasis added):

Total sales to the end of November were down 2.3 percent and comparable store sales were down 1.8 percent, compared to the previous corresponding period. Total sales during the first two weeks in December deteriorated and were down 5 percent on the previous corresponding period. Myer detailed expectations for 1H 2018 Net Profit After Tax (NPAT), pre implementation costs and individually significant items, to be materially below the previous corresponding period.

Myer’s trading during the key Stocktake Sale period was below expectations with total sales during January down 6.5 percent on the previous corresponding period. Total sales in the 1H 2018 were down 3.6 percent to $1,719.6 million, down 3.0 percent on a comparable store sales basis.

Across November, December, and January — the biggest time of the year for retailers — it got uglier and uglier.

The company’s share price bounced a little yesterday after Umbers was dropped but is hovering between 50 and 60 cents having had an issue price in 2009 of just over $4.

In another reflection of the contempt in which the market now holds the company, a Sydney-based retail analyst for one of the major global investment banks told Business Insider this week that they are winding back coverage of the company, because it was a “bit of a waste of time from our perspective given how small the company is these days.”

The analyst pointed out that one of the major threats to Myer’s model — Amazon — is only getting started in Australia too. The headwinds are mounting and with the company now having dumped Umbers’ turnaround strategy it’s perhaps no surprise the chairman is taking questions about the company’s survival.

Veteran broker Richard Coppleson at Bell Potter, asked what he thought of the company earlier this week, said: “Avoid. Sell. It is just a dog.”

There may well be a second pass of last year’s unsuccessful attempt by Solomon Lew of Premier Investments, which owns just over 10% of the company, to replace the board. Umbers has taken his fall but ultimately the board signed off on and supported his failed strategy.

But any successful plan will have to deal with the enormous lease commitments sitting on the company’s books. Look:

Myer annual report

There are $2.7 billion in lease commitments, and a billion of that due over the coming five years. Escaping from this will take the skills of Houdini — or someone who knows an awful lot about writedowns.

Perhaps Hounsell’s accounting skills will come to the fore after all.

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