Lew owns a big enough stake in Myer. When will he take charge?

At what point do Myer’s deteriorating sales become billionaire investor Solomon Lew’s responsibility, and not that of its current board and management?

Probably sooner rather than later.

During the past financial year, Solomon Lew has moved from being an agitating investor to a controlling shareholder with now nearly 30 per cent of Myer.Credit: Paul Jeffers

The 2023 full-year result delivered by Myer on Thursday provides a clear window into the state of the discretionary retail market. And it isn’t pretty.

Myer’s sales hit a brick wall in the final quarter of 2023 and since the end of July have fallen by almost 2 per cent compared with the same six-week period last year.

Its full-year profit numbers are robust and in some respects record-breaking, but they disguise the deterioration in performance in the second half – particularly in the final quarter.

The fall in the dividend to 1¢ a share from the 4¢ in the first half, which came with a 4¢ special dividend, paints a clear picture that Myer is conserving capital for the lean period ahead.

During the past financial year, Lew has moved from being an aggressively agitating investor to a controlling shareholder with now an almost 30 per cent stake.

There is not a lot of fight left in the existing directors, and Lew knows it. The decisions about who runs the company and sits on the board are his for the taking.

Meanwhile, the two most senior management figures at Myer, chief executive John King and chief financial officer Nigel Chadwick have announced they are heading for the exit. King has said he will stay until the second half of the 2024 calendar year, but if a new boss can be found earlier his exit will be expedited.

There is not a lot of fight left in the existing directors, and Lew knows it. The decisions about who runs the company and sits on the board are his for the taking.

His opportunity to seal control of the company won’t formally take place until Myer’s annual meeting later in the year, but the board knows how to read the tea leaves.

Myer’s slow start to the financial year shows it isn’t pretty out there right now for retailers.Credit: Courtney Kruk

The shareholder meeting will also coincide with what most analysts believe will be a further deterioration in the discretionary retail environment.

But there is no uniformity of opinion on how much worse things will get, and when they might start to improve. A cut in interest rates next year might be the catalyst for a pivot in consumer confidence – that might happen in six months, or it might take longer, depending on how inflation travels.

In the meantime, Lew will use his influence to ensure the next Myer chief executive is someone that he chooses, or at least approves.

And we will learn soon whether Lew will put up a slate of new directors for election at the AGM.

What they will inherit is a department store operator that has begun some of the crucial restructuring necessary to be relevant in the changing retail landscape. Growth in the loyalty Myer One program is a clear positive, alongside reducing the number and size of stores.

King has managed to significantly improve the company’s balance sheet, reducing debt and increasing cash. And Myer’s inventory position is healthier, reducing the need for heavier discounting.

The company has engineered a massive turnaround from the half-billion-dollar loss it made back in 2018.

With control of Myer, Lew can make easier decisions about where this investment will sit in his retail empire.

In recent weeks, the billionaire said his holding company Premier Investments was looking at breaking up his retail conglomerate. It will potentially seek a four-way demerger, which would separate sleepwear chain Peter Alexander, Smiggle and the more mature apparel brands from the Premier mothership, which holds investments in Myer and appliance maker Breville.

This would provide a cleaner slate for Premier to deal with its stake in Myer. Lew has been a retail brand asset trader for decades. He will probably be working on options around Myer.

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