Myer board faces AGM wrangle
The board has elected Garry Hounsell as chairman to replace Paul McClintock and recruited an experienced fashion retailer, Julie Ann Morrison, in a bid to lift shareholder confidence in the struggling department store group.
Hounsell has a round of analyst and institutional shareholders to call ahead of the November AGM to head off expected challenges to Myer’s board and management strategies from Solomon Lew and other disgruntled shareholders.
Myer has scheduled a strategy day to provide a full briefing on the progress of its strategy on 1 November, another initiative designed to avoid a difficult AGM that could potentially see challenges to directors facing election.
IRW understands most institutional investors are pleased to see Hounsell assume the chairman’s role and Morrison join the Myer board, but are still to be convinced that the retailer’s strategy will see a return to sustainable sales and earnings growth.
Those institutional investors share the exasperation of Lew, who has the largest shareholding in Myer after acquiring a 10.8 per cent stake in the retailer last March.
The institutional investors are understood to be making no commitments in respect of the AGM agenda before hearing details from CEO Richard Umbers and the management executive team on 1 November.
Hounsell and Umbers have assured analysts and investors of a detailed rundown on Myer’s progress and the so-called “evolution of New Myer”, including information on its merchandise optimisation, omnichannel, digital, data, property and experiential retail strategies.
Lew has demanded Myer also release sales for the three months to the end of October at the strategy day as evidence of improvement in the retailer’s trading.
Analysts and institutional investors are supporting Lew’s call for more than hopeful forecasts and promises about Myer’s seemingly never ending and, to date, underwhelming turnaround plans.
Lew already has a key ally in Stephen Copulos, managing director of Myer’s largest private shareholder, Copulos Group, who has publicly criticised the turnaround strategy, calling for the closure of a third of the remaining 64 stores and an overhaul of brands.
Copulos is also critical of the e-commerce strategy that Umbers has promoted as one of the key areas that is delivering on his turnaround blueprint.
Like Lew, Copulos has been demanding a board shake-up to ensure a greater sense of urgency and a stronger focus on the performance of the business to improve shareholder returns and repair its flagging share price.
Lew asked for and has received from Myer a copy of its shareholder register that would enable him to contact investors ahead of the AGM.
Lew has not nominated any candidates to contest the election of directors, despite having former Myer managing director, Terry McCartney, and former David Jones managing director, Mark McInnes, who could have enjoyed support for a Myer board position from shareholders had they nominated.
Notwithstanding not having his own candidates to contest the election of directors, Lew is expected to voice disapproval of Hounsell and Morrison, arguing that neither bring sufficient retail nous to the board table.
His view is likely to gain support from investors who are increasingly frustrated with more than a decade of turnaround plans and a tanking share price at a time when competition is intensifying in the Australian market.
Myer has touted the fact that Morrison has extensive experience in fashion retailing and brands from the sales floor through to merchandising, buying, marketing and MD.
She was the managing director of Bulgari UK concurrent with MD Bulgari Australia, which is part of the LVMH Group. She was also MD of FJB Australia which had retail and distribution rights for brands such as Gucci, Guess, Moschino, Lanvin and Fendi in South East Asia and Australia.
While at FJB, she also established an international licensing business for local and US brands including accessories for David Lawrence, Sportscraft, Ann Taylor (US) and Bill Blass (US) and has been a consultant to Carla Zampatti.
However, Lew is not enamoured with Morrison’s contribution in the past 15 months a non-executive director and, since July, chair of Speciality Brands Australia, a Myer subsidiary board which provides governance and strategic oversight to the sass & bide, Marcs and David Lawrence fashion businesses.
Morrison aside, the Myer board has only two directors with any significant retail experience, Umbers and Ian Cornell, and that experience was in supermarkets rather than department store retailing.
Cornell also has had experience working with Westfield in shopping centres, experience that no doubt has come in useful as Myer continues to exit or downsize floorspace in under-performing store locations .
The limited retail expertise of Myer directors has not been remedied by the planned ascension of Hounsell to the chairman’s role after just three months as a non executive director and deputy chairman.
Hounsell brings a credible CV to his proposed new role but, despite acknowledgement of his achievements by analysts and investors, the nagging issue is Lew’s assertion that he has no retail experience.
Retiring Myer chairman, Paul McClintock, argues the Myer board is now well balanced with traditional retail expertise as well as experience in the fields that are shaping the new retail environment such as digital, data, customer experience and brand management.
“Myer’s directors also have a wider range of skills required to deliver Myer’s transformation including property, financial, risk management, change and talent management,” McClintock claims.
Ahead of the strategy day briefing this week, Hounsell claims the ‘New Myer’ strategy is helping the business “to compete in a challenging retail environment”.
“While I am impatient for a return to profit growth, I also understand that transformations take time and discipline.
“We are all united in our focus to deliver the ‘New Myer’ strategy. Myer is a much loved brand and we are all working very hard to ensure Myer remains relevant for its customers and delivers for its shareholders.”
Baptism of fire
Hounsell said he was looking forward to meeting the team and visiting stores as well as meeting with Myer’s shareholders to hear their perspectives on the company’s progress.
Hounsell seems certain to face a baptisim of fire when he and Umbers brief analysts at the strategy day and then face up to shareholders who have seen the value of their shareholdings plunge.
Myer has missed all of its key performance targets, including sales and earnings growth, sales per square meter increases and return on investment for capital outlays and has burned $1.8 billion in enterprise value since it floated on the Australian Stock Exchange in November 2009.
Lew has much ammunition with which to confront Myer and could well create mayhem at the AGM as he stokes the fears of investors about the capability of the venerable department store group to fend off foreign competitors such as Debenhams, H&M, Zara and arch rival David Jones.
While David Jones has struggled in the past 12 months, it does have a clear strategy that differentiates its stores from the other international retailers.
As Myer put the finishing touches to its strategy day presentations, the task ahead of the retailer was underscored by the opening of the first Australian store in Melbourne’s St Collins Lane centre of the British chain, Debenhams.
If the Harris Scarfe Debenhams alignment is not enough to cause discomfort, the Swedish retailer, H&M, has announced its fifth Victorian store will open in Melbourne’s Docklands precinct just days before the Myer AGM.
Solomon Lew and his band of unhappy investors have much to deliberate on as they head towards a watershed AGM for the beleaguered Myer.