Solomon Lew says Myer’s online sales numbers don’t add up

Melbourne Cup Day at Flemington Racecourse. Daniel Pockett/Getty Images for the VRC
  • Premier Investments says Myer’s online business growth isn’t the standout it’s claimed to be.
  • The rate of online sales growth is actually falling, halving between the first and second quarters of 2018.
  • And Premier says the decrease in store sales and a significant increase in stock shrinkage are indicative of Myer removing sales staff.

Solomon Lew’s Premier Investments, the biggest shareholder in Myer, says the department store’s half year results are short on detail around the issues lurking in the numbers.

The retailer yesterday 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.

Premier, which has a 10.8% holding in Myer and is agitating for the board of directors to be replaced, says the results announcement by Executive Chairman, Garry Hounsell, was long on hype and false optimism.

Among the issues, Premier says the stores-only sales for the half fell by 5.8% across both quarters for a total loss of sales of $100 million.

“However, the bigger issue is that Myer went to some lengths to say that online was the standout for the half,” according to the analysis by Premier.

“The numbers released yesterday actually reveal that, far from being a standout for Myer, its online sales growth rate is dropping, and this is potentially the key driver of its most recent downgrade.”

The two Myer profit downgrade announcements in December 2017 and January 2018 called out the rapid decline in Myer sales as the reason.

“A simple analysis of yesterday’s result shows that total sales at Myer dropped 2.8% in Q1 2018 but dropped 4.2% in Q2 2018,” says Premier.

“The key issue is: now that we have the numbers for the full half, what was the root cause for the rapid decline?”

Premier says the answer is online.

Myer’s stores-only sales dropped 5.8% in both the first and second quarter. But Premier says the online rate growth slipped from 67.8% in the first quarter to only 35.9% in the second three months.

Myer yesterday said online now represents Myer’s third largest store, with sales growth of with sales growth of 48.9% over the six months.

“I am again calling for all Myer shareholders to unite and save our company from the Myer Board,” says Solomon Lew, the Chairman of Premier.

“Yesterday was surely the final nail. There can be no sensible argument mounted in defence of the Myer Board. It’s now just a matter of how and when we replace them.

“Premier continues to caucus with fellow Myer shareholders with the objective of calling an EGM to replace the failed Myer Board with a new, performance-focused Board.”

Premier says Myer is taking out store staff.

“The decrease in store sales and the significant increase in stock shrinkage are indicative of Myer removing sales staff from the floor,” it says.

And Premier says Myer’s second half results will be even worse.

“It is clear that if the declining sales trend of 1H 2018 continues there will be a large EBIT (earnings before interest and tax) loss in 2H 2018,” says premier.

Premier Investments, which has Smiggle, Peter Alexander, Just Jeans, Portmans, Dotti, Jay Jays and Jacquie-E, is a standout among Australian retailers, growing sales where others struggle.

Premier Investments this month posted a 9.36% rise in net profit after tax to a record $78.6 million for the half year on the back of strong growth in children’s stationery chain Smiggles and pyjamas label Peter Alexander.