Changing of the guard
The announcement that Bernie Brookes has stepped down from his position as CEO of Myer ahead of the release of first half results on March 19 suggests the trading outcome will be less flattering than expected.
Analysts are predicating their forecast on David Jones’ recent performance, but retail sales data for the industry released to date indicates that Myer is unlikely to have matched its department store rival.
It would make sense to think that Brookes would be front and centre to comment on first half results if they did point to an improvement in trading and traction in the retailer’s growth strategy and to then make a gracious exit with the announcement of a new CEO.
Announcing the immediate resignation of Brookes as CEO and the appointment of his successor, Richard Umbers, a fortnight before the results announcement suggests Myer continues to struggle for sales growth and is facing a fall in profitability and marketshare.
Brookes will remain with Myer for two months transition to the new CEO.
His exit does not necessarily translate to panic stations at Myer, as he had been expected to quit his role late last year, but stayed on in large measure to bed down a proposed merger with David Jones that was trumped by South Africa’s Woolworths.
The departure indicates that Myer has failed to realise the growth that Brookes forecast from an expansion of its store network, development of an online retail capability, and an overhaul of merchandise ranges, while quitting categories with lower sales and earnings.
The test of any leadership is that the business is in better shape when the CEO exits and there is a succession plan in place.
Rating Brookes is a difficult proposition, given that Myer’s trading performance has been underwhelming and well short of the promise of the retailer’s return to the Australian Stock Exchange (ASX)
in November 2009. There has been a procession of departing senior executives.
Yet, arguably, Myer could have fared much worse in a period characterised by subdued consumer spending following the global financial crisis and a dramatic surge in competition from international retailers entering Australia as well as online retailers.
Brookes remains one of the most popular identities in retail, with Russell Zimmerman, CEO of the Australian Retailers Association (ARA), describing him as “an outstanding individual at both a professional and personal level” and a “strong team player in the retail industry” who dedicated much of his time to benefit the retail sector as a whole.
Announcing the leadership change this week, Myer chairman, Paul McClintock, said Brookes had guided the business through an eventful period, from a turnaround under private ownership to a public listing, and through sustained weakness in consumer sentiment, competitive disruption and structural change.
McClintock said Myer has been “well served by having a retailer of Brooke’s calibre” over eight years.
Brookes’ appointment as CEO in 2006 raised eyebrows because his background was in supermarkets rather than department stores, but early initiatives showed promise, particularly in strengthening earnings.
Challenges mounted, and McClintock conceded that Brookes’ five point growth strategy was not delivering the expected results and that a need for a change at the top was evident as Myer reviewed its business in the wake of the thwarted David Jones merger plan.
“It has become clear that to thrive in a modern retail environment, Myer must adapt more quickly and be closer to its customers,” McClintock said.
“A strategic review has been ongoing for some time, with a view to reshaping the business for a profitable, sustainable future. The addition of highly experienced executives last year has brought a broad range of perspectives to the strategic review.
“Based on this work it has become evident that a transformation project of the scale required to achieve the board’s vision will take a number of years to implement,” McClintock said.
“The board and management team have agreed that the transformation work has reached a pivotal point and it is appropriate for a new CEO to be given the opportunity to own, lead, and drive the transformation program over the coming years.”
McClintock says Myer has now established the framework of its new strategy, taking into account factors including the impact of major international brands and a regulatory backdrop which has led to increased operating costs.
“The findings from an extensive customer research project utilising internal and external data have delivered a clear definition of the current and future Myer customer, what they want, and how they shop.”
To lead the new drive for growth at Myer, the board has turned to Umbers, who, like Brookes, is a former Woolworths supermarket executive.
Umbers joined Myer in September as chief information and supply chain officer, with responsibility for online strategy, financial services, and Myer One, as well as the logistics and IT functions.
Prior to Myer, Umbers was executive GM of parcel and express services at Australia Post, and CEO of StarTrack.
As well as Woolworths, he was MD of New Zealand supermarket chain, Progressive Enterprises, and MD of one of Aldi’s regions in the UK.
McClintock said Umbers has, in his short time at Myer, demonstrated he is a contemporary retailer with the clear ability to reshape Myer in a new retail landscape.
“He has broad international experience across the retail sector and, importantly, success in leading business transformation. He heads up a highly experienced executive team with strong international and fashion credentials,” McClintock said.
As part of the management change at Myer, another newcomer, Daniel Bracken, has been appointed deputy CEO in addition to his current role as chief merchandise and marketing officer.
Like Umbers, Bracken joined Myer in September last year following an international career that includes more than 15 years at Burberry London and most recently, CEO of The Apparel Group.
The two new leaders will need to find a new CFO as an early priority, with Mark Ashby resigning to take up a position in the US.
Focusing on the task ahead, Umbers said Myer must be more consistent in putting the customer at the centre of all of its thinking.
“As a team we are working on how we will deliver on our promise of creating wonderful experiences for our customers and bringing the love of shopping to life,” Umbers said.
“Myer believes that there is a significant opportunity available to the business and expects a new strategy to drive sustainable revenue and profit growth.”
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