Terry McCrann: Nothing can heal rift between Lew and Myer CEO
The bromance between Myer’s biggest shareholder Solomon Lew and its imported CEO, John King, is well and truly over, writes Terry McCrann.
Terry McCrann
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I think we can conclude that the billionaire’s bromance with the imported retailing veteran is over — just like so many other relationships have fractured and foundered under the stresses of the virus.
It’s pretty hard to believe that Myer’s most persistent and critical shareholder, Solomon Lew, and its CEO, John King, can kiss and make up, figuratively speaking of course, after Lew’s brutal, pungent and unambiguous call for him to be sacked.
It was also a long way in substance and sentiment from those early months, after King arrived down under in early 2018, when Lew was saying such nice things about someone inside the Myer executive suite (or boardroom) for the first time in probably at least 20 years.
We’ll put aside for the moment just exactly who would do the sacking; after all, Lew kicked off his tirade by demanding the Myer board — the entire Myer board, led by his long-term target, chairman Gary Hounsell — exit as well, and indeed first.
Presumably, Lew would see the departing board leaving a note sacking King with one of the cleaners on their way out, to be on-passed to King. So, what, nobody would be going down with the Titanic?
Now it’s more than a little unfair for Lew, as he has done, to brand King as a failure based on the results he unveiled yesterday.
Gee, we’ve just seen government-mandated brutality, the like of which we’ve never seen before in at least 100 years, wreaking havoc across the bricks-and-mortar retail sector (and indeed, everywhere else) through most of the Myer second half-year (ending at the end of July).
I’m not aware of any previous period where a government ordered — ordered — stores like Myer (and a hell of a lot of other retailers) to close, as Myer indeed did for nearly two months.
Indeed, Lew knows better than most — correction, as the nation’s (lower-case) king of retail, better than everyone — just how tough things got. After all, with his stores in his Premier group, he responded by simply refusing to pay rent.
Further, I have to say, after nearly 40 years watching Lew since he first got interested — obsessed, actually — with Myer through its first “bad patch” in the early 1980s, I was not surprised. It exactly captures why he’s a billionaire and I’m not — along with, I presume, most of you also.
At its most basic, the Myer result is two things. It’s all but meaninglessly incomprehensible and it wasn’t that bad in the (extraordinary) circumstances.
Myer, of course — along with its both figurative and in many places (like the Bourke Street Mall which looks like a set for an “On The Beach” remake) literal next-door neighbour David Jones — went into all this existingly, existentially challenged.
At the most basic, it’s a testament to King that Myer not simply survived but has actually emerged into the new trading year in impressively good shape — and King actually managed to put the enforced “hibernation” to some good long-term strategic repositioning use.
True and importantly, with more than a little bit of help from Scott Morrison and Josh Frydenberg’s $93m of JobKeeper payments.
But that points to why it’s hard to impossible to sensibly dissect the numbers. You’ve got that money coming in to subsidise staff who would otherwise be sacked or stood down — and were mostly for two of the months anyway.
Yes, Myer recorded huge rises in its online sales. But that could never make up for the falls in store, along with the continuing overhead of those stores but now also the huge (and unplanned) cost increases to support online.
There is no way you could apply conventional assessment of the numbers, like we do with retail — gross margin, sales per square metre etc.
That’s before “adding” the distortions of the JobKeeper payments and JobKeeper itself.
But at the end of all that, it still posted a positive (normalised) EBITDA of nearly $100m and its bottom-line loss — again, yes, normalised — was only $11m.
Yes, the existential challenges remain and are clearly now even more potent given the structural changes to retailing that will flow from the lockdowns.
And yes, Lew will exploit whatever leverage he can: trust me, that’s what he does, and he does it hard and relentlessly. Just as he’s “been there” for nearly 40 years now.
But in my opinion the numbers show King coming through the toughest test ever posed for a Myer CEO; and coming through it better than any of its CEOS in a very long time.
AMP: A LESSON IN SELF-DESTRUCTION
Talking of fallen icons, the AMP used to be the biggest and most trusted name in Australian finance — bigger and more trusted even than the Commonwealth Bank.
Indeed, it was one of the biggest and most recognised brands across the entire consumer experience — up there with brands like Coca-Cola and Holden (hmm).
Yet it is entirely likely, indeed arguably probable, that it will disappear in the not-too-distant future.
Not simply that as a company, as an operating entity, that AMP might — will — get taken over or split into bits that are then sold; but that no one will actually want the name.
Simply, that the brand now actually, arguably, has negative value.
It is worth nothing and this result was “achieved” by successive boards of directors, CEOs and line managers, who were paid very large sums in remuneration. This is food for considerable — and much wider — thought.
Originally published as Terry McCrann: Nothing can heal rift between Lew and Myer CEO