Myer hits back at Premier
After Premier Investments chairman Solomon Lew’s repeated calls for shareholders to spill the board of Myer, Garry Hounsell, executive chairman of Myer, urged shareholders not to risk the future of the company based on the campaign of a “conflicted shareholder and competitor.”
In a letter to shareholders on Monday, Hounsell called Lew’s “hostile and misleading campaign” an attempt to take control of the department store.
“At this critical trading period, this hostile campaign impacts negatively on customers, team members and, ultimately, on you our shareholders; and Premier Investments should be ashamed of this,” Hounsell wrote.
Premier Investments responded to the letter with a statement that said Hounsell’s letter “reeks of a group of scared directors who know their time at the trough is coming to an end.”
While Lew has been critical of Myer’s board for the past 12 months, the department store’s revelation on Friday that its sales dropped 4.8 per cent in the first quarter of the 2019 financial year has stoked the fire.
“A sales drop of 4.8 per cent (nearly $1 in every $20 of sales disappearing) is something that even Father Christmas can’t turn around… The failed Myer board must go,” Lew said in a statement on Sunday.
Citi retail analyst Bryan Raymond noted that this drop in sales is reflective of softer trading conditions across the industry in September and October.
“Myer has been clear they are willing to sacrifice sales to improve profitability,” Raymond said.
“The October quarter is seasonally a loss making period for Myer. Management did state that the 1Q19 loss narrowed versus 1Q18 despite the decline in sales.”
Looking toward the holiday period, Raymond said it will be the first test of Myer’s discipline around the winding down of discounting given the number of key sale events, which could be impacted by the relative growth of key competitor David Jones.
David Jones saw 2.4 per cent like-for-like sales growth for the 20 weeks to November 11, largely driven by a 48.4 per cent growth in online.
“We think it’s possible David Jones is not winding back promotions if it is delivering strong growth, which could impact the success of Myer’s profit-driven strategy,” Raymond said.
As for the year ahead, Citi forecasts an uncertain outlook for Myer in FY19 and expects the business to breach covenants by the second half of FY20, as earnings continue to decline.
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