d to a rigorous review of the likely return on investment for the renovation and its future sales growth prospects. The Pacific Werribee shopping centre dominates a large, rapidly growing nappy valley trading catchment and Myer is under-represented in Melbourne’s western suburbs, with the nearest stores to Werribee at Highpoint Maribyrnong and Geelong. The two-level 12,500sqm Myer store is the major anchor tenant of the $400 million upgrade and extension of Pacific Werribee, which started trading last week. The same vigorous review of Myer’s store portfolio has not been so kind to other stores in the retailer’s national network, including Top Ryde in Sydney as well as Forest Hill and Dandenong in Melbourne. Myer has also shelved other stores that were planned as part of a growth strategy under former CEO, Bernie Brookes, including Plenty Valley in Melbourne, Woden Plaza in Canberra, Coomera in Queensland and Tuggerah in New South Wales. Myer CEO, Richard Umbers The retreat on new store development and the culling of under-performing stores with little prospect of satisfactory future growth has been a key plank of new CEO, Richard Umbers, revised growth strategy. Umbers has moved away from the ‘build it and they will come’ strategy to a more tailored network that aims to boost sales by higher productivity from ‘right sized’ stores with a merchandise offer that more effectively targets local market profiles. Umbers recently told a business forum in Melbourne that consumers are rebelling against sameness and cookie cutter stores. Umbers said the department store is aiming for a Myer DNA across its store network, but with each store developing its own personality and merchandise ranges to suit their local catchment. He told the Australian British Chamber of Commerce that customers were looking for uniqueness and experiences and were going to stores looking for the entertainment value of finding new and interesting merchandise. In a trial that is planned for a rollout across the network, Umbers has given the Myer Melbourne and Sydney management teams more power over their budgets, allowing them to exercise more control over buying and merchandising. The decentralised decision-making plan is a key element of Umbers’ $600 million five-year turnaround strategy. Risky business In theory, it makes a lot of sense to tailor the retail offer of a store to its local market. Inside Retail Weekly well remembers some years ago finding the most lamentable swimwear department and a thoroughly Melbourne suburban feel to the Myer store in Cairns in far north Queensland. However, there is considerable risk in Umbers’ approach, an approach that has been tried before in one of the many turnaround, transformation and reinvigoration strategies that have bedevilled Myer back to at least the 1980s. The most obvious issue is the problem of individual stores accumulating unsaleable stock and creating an inventory drag on profitability. One of the first actions of Umbers’ predecessor, Bernie Brookes, was to close down warehouses that were chock a block with merchandise that hadn’t sold in stores and had been hidden away out of sight until a day of reckoning that hit the retailer’s bottom line. The more crucial issue, however, is the Myer DNA. What exactly does the Myer brand encompass? What does it stand for?  What is its unique selling proposition or its clarion call to today’s consumers? The major challenge for Umbers is to make the Myer brand relevant to today’s consumers and to make it stand out from the crowd. Umbers is right to want Myer stores to have a unique personality and an inventory that meets the expectations, needs and aspirations of a local market rather than cookie cutter stores. But the execution of that strategy carries considerable risk if store management doesn’t have the skills, the discipline or the honesty, let alone the savvy, to properly read their local market. At this point, it is doubtful that Myer does have store management equipped to successfully execute Umbers’ localisation plan, so Myer faces a heavy investment in management and staff training and development if it is succeed with the strategy. Myer currently has annual sales of more than $3 billion and revenues edged up in the first three quarters of the current financial year, with the last quarter and annual results to be reported in September. Myer’s performance is lagging archrival, David Jones, but has given some encouragement to investors despite Umbers’ warning that earnings are being restrained by the costs of the turnaround strategy, higher inventory costs, clearance of unwanted stock, a higher wages bill and capital expenditure to improve store environments. Umbers advised investors when half-year results were released that net earnings for the 2016 financial year are likely to be in the range of $66 million to $72 million, reflecting implementation costs of the turnaround strategy and a sharp deterioration in margins. Umbers claims there are positive signs already from the Myer turnaround strategy that emerged from a comprehensive review of the lumbering department store chain in late 2014, after the retailer’s merger overtures to David Jones were rejected. Umbers argues the focus on customer service and the restructure of the brand portfolio have received an encouraging response from customers with a dozen key stores notching five per cent plus sales growth in the first half. For the third quarter, Myer reported a 2.1 per cent lift in sales to $675.5 million with comparable sales up 3.4 per cent. But the final outcome for the year will depend on the pluses and minuses of store closures and store upgrades and openings. When releasing its third quarter results, Myer warned the Federal election could be a drag on sales for the final three months and that the early weeks of the period had been hit by unseasonably warm weather. The weather issue has been corrected with a vengeance and should actually provide a fillip to sales, provided Myer did not quit too much of its winter stock early. At the three-quarter mark, annual sales were tracking at an increase of 1.9 per cent to $2.47 billion and up 3.3 per cent on a comparable store basis. Category management, inventory changes and store development initiatives lifted floor space productivity in store by 5.1 per cent on a sales per square metre basis for the third quarter and 4.4 per cent year to date. Umbers contends the results of the first three quarters demonstrated the ‘new Myer’ was moving in the right direction and that customers were responding well to the retailer’s strategy. He said the results were encouraging in what was a transitional year for the business in which significant investments are being made for future growth. Myer expects pre-tax implementation costs for the execution of its strategy to be between $20 million and $30 million this financial year. Myer’s brand overhaul Apart from reshaping the store network and improving staff levels in stores, Umbers has been working on a revamp of the Myer online retail offer and has recruited two major British retail brands as part of a seismic overhaul of the Myer brand portfolio. Well over 100 brands have been axed and Myer’s own house brand ranges have been trimmed to meet Umbers’ objective of a, ‘narrower, more powerful range’. Myer is now developing Aje, Jack and Jones, Mimco, Seed, Nine West, French Connection, Skin and Threads, Calvin Klein White Label, Sass & Bide, Morrison, Industrie and Veronica Maine in a rollout of 500 new brand destinations, some of which will only be represented in a select number of stores. The two British brands recruited by Myer are Topshop and Topman, which is rolling out in concession outlets to around 20 Myer stores, and a John Lewis concept shop that will launch in Warringah Mall Sydney by the end of the year and then roll out to five premium Myer store locations. The brands give Myer a differentiation from its competitors and have the potential to attract sorely needed new younger customers and lift flagging margins. However, there is also a risk to Myer incorporating brands such as John Lewis and Topshop and Topman in its stores because it potentially further confuses what the Myer brand itself actually stands for. For a long time, Myer and David Jones have offered customers in their stores, concession stores of brands that are located a few feet away in full range stores in shopping centre malls. Adding more brands that already have standalone stores in shopping malls begs the question of how Myer can establish its own DNA and meet the expectations of those customers Umbers himself says are looking for uniqueness and experiences as well as the entertainment value of finding new and interesting merchandise. Myer has to re-establish itself as a destination and as a relevant brand with its own compelling attractions to customers rather than to be a hybrid of bits of other retail brands if it is to regain sales and earnings momentum.