Terry McCrann: Why Myer must be ruled by King
Shareholders in the Myer department store group should be asking if this is really be a good time to be throwing the whole management and leadership of the battered company into chaos by voting to sack the chairman, asks Terry McCrann.
Terry McCrann
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Shareholders in the Myer department store group should understand this very precisely – a vote to sack the chairman Garry Hounsell at next week’s AGM is also, far more importantly, a vote to sack the company’s CEO John King.
Hounsell is the only director up for re-election. If billionaire – and 40-year Myer obsessive, from both inside and outside the boardroom – Solomon Lew succeeds in getting Hounsell turfed, King’s position would become utterly untenable.
At its most basic, every Myer shareholder, both retail and institutional, has to ask themselves: would this really be a good time to be throwing the whole management and leadership of the battered – and, bluntly, existentially challenged – company into turmoil and chaos?
That is also before assessing the quality of King’s performance in the two years he’s been CEO. In my judgment, it’s been somewhere between very effective and outstanding – and what he has managed to keep doing through this year of plague has been particularly impressive.
He’s steered Myer through all the, in themselves, existentially challenging issues posed not so much by the virus but the hysterical reactions of government and especially that of the government in Myer’s home state and biggest market of Victoria.
There are many retailers who will not be coming back from all this – for them the quaintly and totally false characterisation of being in ‘hibernation’ will be the hibernation of the corporate coffin; thanks to King, Myer will not be one of them.
But even beyond that, King has continued to tackle aggressively and very effectively the fundamental existential challenges that were there before the virus and have been sweeping over all bricks and mortar 20th century and especially generalised department stores like Myer.
These are challenges that have only been accelerating since the heady days of another of his downunder-transplanted compatriots Bernie Brookes and the ill-fated ‘Jennifer Hawkins glamour with a capital-H float’.
King would have had an impressive story to tell but for all the red ink imposed, to repeat, not so much by the virus but the brutal government hysteria.
Indeed he still has it to tell – the major steps taken with downsizing (floor space reduced by 75,000 sqm) and rationalisation (11 stores shut); to winning major concessions and active assistance from landlords; permanently taking out costs; rationalisation of product lines; and locking in through 2022 a new financial package.
In short King has delivered the all-critical core stability to the group while making it more actively pre-emptive to the market changes and challenges – and then carried it through the worst year ever imposed on retail by government.
To have actually finished the year (at July 31) with net cash of $8m – that’s $87m of cash less debt of only $79m – as against a net cash deficit of $39m the year previously, is quite simply astonishing.
Now all this is a judgment, I would suggest – and knowing, and I mean, knowing Lew all through those 40 years – that would be fully if secretly shared by Lew, despite and indeed actually precisely because of the lashing he unleashed on King at the Myer result.
Back then a month ago Lew demanded King be sacked, well and truly ending the ‘bromance’ that had simmered between them since King arrived in what seems a lifetime ago but was only in mid-2018.
I begged to disagree; I noted that “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”.
Indeed you could very well conclude that was precisely what alarmed Lew: that with only 10 per cent of Myer he needed big-time support from especially instos but also retail holders; and based on Myer’s operational and even more structural performance, they’d be nuts to want him, King, gone.
Indeed King did something really, really important – which is not well recognised or even understood.
I’ve long maintained that one big thing has to happen. It can’t deliver Myer – department stores more widely – into a golden future. But it is the only path to any future.
Simply, that Myer and David Jones merge and promptly close something like half their combined stores. Post-virus, perhaps, at least half.
What King has done over the past year or so is make Myer the unquestionably dominant party in any such attempted marriage – as DJs has floundered inside its own seriously challenged (management, operationally and strategically) South African Woolworths (no relation) parent.
The biggest tribute to King is how badly DJs came through 2019-20 and how seriously under pressure it now is.
Maybe Lew sees his chance of nabbing Myer cheaply fast ebbing away.
Now, I’m no great fan of Hounsell, but it should now be crystal clear that the best thing he did – and it was a very big thing in the life of Myer – was getting King, giving him his head, and having his back.
Here’s a thought for all the players. Shouldn’t Lew give up on ‘nabbing Myer’ – and switch to instead nabbing a combined Myer-DJs?
Lew is the unqualified unparalleled dealmaker in retail and always a – somewhat uncomfortable – hands-on chairman.
Myer has the best CEO it’s had since at least (the early) Brookes and maybe back beyond him into the 20th century.
While Lew has the best CEO DJs has had, without qualification, well back into the 20th century in Mark McInnes.
To my mind they could make a pretty good team – if, apologies to Di, three can fit in the marriage.
Originally published as Terry McCrann: Why Myer must be ruled by King