By Dominic Powell
Billionaire retailer Solomon Lew has slammed the board of beleaguered department store Myer and called for its directors' and chief executive's resignation after the department store posted a massive $172 million full-year loss on Thursday.
Mr Lew, who owns around 11 per cent of Myer and is its majority shareholder via his company Premier Investments, said the results were "disastrous and shameful" and the retailer's turnaround strategy under chief executive John King was "in tatters".
Solomon Lew has accused Myer of turning into the world's largest post office.Credit: Paul Jeffers
"The numbers are dire – notwithstanding the impact of COVID-19, the business is trading beyond poorly – sales are down, EBITDA is down – on top of massive further write-downs to its brands and leases," Mr Lew said.
"Premier again calls for the immediate resignation of the Myer board and for an urgent management overhaul. The CEO [should] follow the board through the exit. "
Mr Lew's calls echo those made by the billionaire in 2018 when he unsuccessfully attempted to force out Myer's directors and install his own representatives on the board after years of falling earnings and weak share price growth.
Premier did not nominate any directors for Myer's board this year, however the veteran retailer is likely mulling options for other ways to spill the board, such as an extraordinary general meeting.
Myer CEO John King says "nothing was off the table" as the struggling retailer grapples with the effects of the pandemic.
Myer swung to a $172.4 million net loss in the year to July 25 after the department store chain was forced to write down the value of its brand names and was battered by the COVID-19 crisis. That was an 800 per cent decline on the $24.5 million net profit posted in 2019. Revenue fell 15.8 per cent to $2.52 billion.
Its shares plunged 15 per cent to 22 cents on Thursday following the announcement as investors reacted to the worse-than-expected numbers. Myer did not declare a dividend.
The company is now pinning its hopes on its online division, which grew 61.1 per cent for the year and now accounts for 17 per cent of total sales, or around $422 million.
Myer wants this channel to be a billion-dollar business in the coming years and invest more to achieve that goal. The company recently inked deals with Amazon and Australia Post which will improve its delivery and click and collect offerings.
However, Mr Lew said the online channel was eroding the business' profits and the board risked turning the retailer into "the world's most expensive post office".
"Myer appears to be transforming itself into the world’s most expensive post office. Its latest deal hinges on the hope Amazon customers buy something else on a whim when they collect product from the Myer badged post office. It is desperate and sums up just how lost Myer is," he said.
"As a long-suffering investor and supplier, Premier itself is perplexed."
Myer appears to be transforming itself into the world’s most expensive post office. [...] It is desperate and sums up just how lost Myer is.
Solly Lew
Mr Lew also took a swing at fellow Myer shareholder Geoff Wilson, whose investment firm Wilson Asset Management (WAM) owns around 7 per cent of the retailer. The results were a "great discredit" to Mr Wilson, the billionaire alleged, and called for WAM investors to hold him to account.
"The arrogance displayed by Mr Wilson in backing [Garry Hounsell] as chairman of Myer over the wealth of retail experience in Premier is breathtaking," Mr Lew said.
"Mr Wilson should now acknowledge that the continued failure of Myer is at least partially his own fault and his investors should hold him to account for the losses they have sustained and will continue to endure unless there is immediate change."
Mr Wilson said there was no love lost between him and Mr Lew, who he respected as one of "Australia's great retailers", and said he understood why the Premier chief might be upset over Myer's performance given he invested when Myer shares cost more than $1.10.
"There's a lot more pain for Solly [Lew] at $1.10 compared to when we started buying at 40 cents," he said.
Wilson Asset Management's Geoff Wilson is one of the few remaining institutional Myer shareholders.Credit: James Alcock
Asked if he would support another attempt by Mr Lew to overthrow the Myer board, Mr Wilson said he was looking forward to receiving a phone call from the Premier chief and he was "always willing to talk to other shareholders".
A Myer spokesperson said it had no response to Mr Lew's comments. Mr King was frank about the troubles facing the retailer on Thursday, telling The Age and The Sydney Morning Herald its inner-city stores could be at risk.
"People are being actively discouraged not to come to the CBD by state premiers, so I do think there's going to be a fundamental change," he said. "We're having conversations with the landlords as we have a couple of CBD store leases up in the next few years."
CBD stores were unlikely to disappear entirely, Mr King said but could be shrunk to as little as one floor as the retailer looks to significantly reduce its costs and massively increase its online business.
"The fact is that CBD stores were walloped pre-COVID, during COVID and even post the lockdowns as w
ell. All the big cities are in the same boat around the world, doesn't matter if you're in Melbourne or Madrid."
The department store received $93 million in JobKeeper wage subsidies, the highest amongst its retail peers, for its 10,000 staff which were stood down during store closures. Over half this amount was a direct fillip for the retailer and helped it turn its $38 million in debt to a net cash position of $7.9 million.
However, Myer will not be eligible for the government's revised JobKeeper package due to its recent trading performance. Chief financial officer Nigel Chadwick said the business had been taking a conservative approach to costs to prepare for the subsidy loss, but warned cuts may have to be made to the department store's workforce.
"We're certainly looking at how we manage the stores based on our lower foot traffic. We'll continue to rationalise depending on peak trading hours versus non-peak hours," he said.
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