‘Could have been better managed’: Myer posts $476 million loss, writes down brand value by $500m

Photo: Graham Denholm/ Getty.
  • Myer sales are still falling after what the chairman calls “failure” to respond to competition.
  • Dividends have been withheld as the company goes to the red.
  • Impairments of half a billion dollars are greater than the company’s market capitalisation of $353 million.

Iconic Australian retail store Myer has just posted a spectacular loss for the half year to January.

The retailer reported a loss of $476.22 million for the six months, driven largely by a $515 million impairment, with sales down 3.6% to $1.72 billion. Dividends are cancelled.

Like for like sales were down 3%. In the second quarter, sales dropped 4.2% to $1.02 billion, slipping 3.6% on a comparable store basis.

Restructuring, store exit costs and impairment of assets came in at $538.23 million. At the close yesterday, the market capitalisation of Myer at $353 million was less than the impairment.

In early trade today, Myer shares were up 4.6% to $0.45, but still near a record low.

Garry Hounsell, who is Myer Executive Chairman while the company seeks a new CEO, highlighted poor execution of the retailer’s strategy, including what he called a “failure” to respond to the heightened competitive environment prior to Christmas.

He says execution of strategic initiatives “could have been better managed”.

“Some elements of the strategy, which targeted a new high value customer were rolled out too quickly and didn’t balance enough attention on Myer’s traditional customer base, adversely impacting profitability,” he says.

He says Myer remains within all financing covenants and the company has started discussions to facilitate an orderly refinancing based on the company’s future debt requirements. Net debt is $19.9 million.

Sales have improved in the first seven weeks of the second half after “poor trading” in January. “However week to week volatility continues,” the company says.

The Myer board is under attack by its largest shareholder, Solomon Lew’s Premier Investments with a 10.8% stake, which is agitating for the chairman and directors to be replaced.

What’s next?

Hounsell says the company will have a renewed focus on product, price and customer service.

“My ongoing engagement with customers, team members, supplier partners and external stakeholders has reinforced my view that Myer must regain its historic reputation for great value and customer service,” he says.

“The work on value is progressing well and with the right training, together with appropriate incentives and supported by technology, our team members can deliver on our customer service aims.

“In order to improve the performance in our stores, we need to direct our marketing and visual merchandising towards our new, exclusive and on trend products, backed by compelling value and promotions.”

He has been driving the management team to trade the business more aggressively.

“To achieve this, I have renewed the entire team’s focus on product, price and customer service,” he says.

Hounsell highlighted Myer’s online performance, with sales growth of 48.9%, as a standout element of the result.

A focus online

The management team is devoting additional resources to maximise its potential, he says.

Online now represents Myer’s third largest store.

“We are investigating the viability of establishing both online and loyalty as separate business units to give them more prominence as future growth drivers,” he says.

“I am encouraging the team to explore commercial partnerships to capitalise on their potential and unlock shareholder value.”

The board decided not to declare an interim dividend declared and to revisit the issue of dividends at the full year results.

The chairman and board of directors have taken a pay cut. Non-Executive Directors’ fees have been reduced to $120,000 from $150,000. The Chairman’s fee has been reduced to $300,000 from $350,000.

Myer’s half year numbers in detail: