Incoming Myer chair Gary Hounsell hits back at repeated attacks from ‘hostile’ Solomon Lew

The incoming Myer chair has called on shareholders to snub Solomon Lew and to maintain faith in its turnaround plan.

Myer's incoming chairman Garry Hounsell at the company’s Bourke street store. (David Geraghty/The Australian)

Myer will fight its biggest investor, retail billionaire Solomon Lew, on a campaign slogan based around the idea of supporting an “independent Myer,” as it calls on shareholders to defend it from the clutches of Mr Lew.

Incoming Myer chairman Garry Hounsell has today written to shareholders in the department store for the first time to defend the retailer’s poor performance and the ongoing onslaught from major shareholder Mr Lew, promising he has the skills and the team to turnaround Myer and that allowing Mr Lew to appoint directors to the Myer board was a risk that could threaten performance.

He also hit back at Mr Lew and his campaign of “hostility and obstructive” actions that Mr Hounsell believes highlights why nominees of the billionaire cannot be allowed to be appointed to the Myer board.

In a two-page letter to Myer shareholders, Mr Hounsell has also called on investors to vote in favour of the election of all three directors at the upcoming annual general meeting — where he is also up for election — and other resolutions including the adoption of the remuneration report and payments to chief executive Mr Umbers.

Weathering a sustained and increasingly heated attack from Mr Lew and his Premier Investments (PMV) over the last month, Mr Hounsell has written to shareholders to tell them the new Myer board under his leadership has the right skills to lead the transformation of Myer (MYR).

“I acknowledge shareholders’ disappointment and frustration with Myer’s share price. Today’s Myer board has a fresh perspective on the business and is committed to the New Myer strategy with a dedicated focus on building shareholder value.

“The Myer board and management are a highly cohesive team that are focused on delivering a complex transformation in tough trading conditions. However, successful transformations take time and we are two years into a five year transformation.’’

Mr Hounsell showcased his directorships with Qantas and Treasury Wine Estates to highlight his personal association with company and business turnarounds.

“I have been a part of a number of recent successful business transformations including Qantas and Treasury Wine Estates where I have helped unlock billions of dollars of shareholder value.

“I know from my time at Qantas the value that lies in a strong customer loyalty program. I am determined to see value unlocked through the effective use of the Myer One customer loyalty program.

“Since I joined the Treasury Wine board in 2012, its iconic brands such as Penfolds have increased in profitability with shareholder value increasing more than threefold since 2012. I therefore believe I offer shareholders the track record and experience in helping turn around much loved icons such as Myer.’’

Mr Hounsell also warned against Mr Lew’s Premier Investments, which is Myer’s biggest shareholder, being allowed to appoint a number of nominees to the Myer board, as it had requested last month.

“Appointing Premeir nominees to the Myer board is a risk,’’ Mr Hounsell told Myer shareholders in his letter.

“As you may be aware, Premier is not only a Myer supplier but also operates businesses that are outright competitors to Myer. Therefore, Premier is also a threat to the performance of our company as it fights for the business of Myer customers.’’

Mr Hounsell said the potential risks of allowing a competitor into the boardroom where highly sensitive matters are discussed would be “enormously damaging” and against the best interests of Myer shareholders.

He also said Premier’s recent public campaign of “hostility and obstructive actions’’ shows it was acting for its own benefit rather than in the interest of all Myer shareholders.

“It also shows disregard for the cohesive functioning of Myer’s board and management at a critical time in our transformation and for proper board functioning.’’

He said if Premier got its three nominees it would control 43 per cent of non-executive board seats, and that the issue of Premier gaining control of Myer without paying a takeover premium must not be ignored.

Mr Hounsell called on shareholders to “act now to support an independent Myer’’ and vote in favour of all resolutions at the AGM in late November.

Mr Lew has once again come out swinging at Myer and its board earlier today, just two days out from Myer’s crucial strategy day, repeating the claim he was misled into spending more than $100 to buy a stake in the struggling department store owner and that legal options were being considered to “urgently needed change to ensure that Myer shares are trading in an informed market”.

In another blistering statement from Mr Lew’s Premier Investments, which in March bought 10.8 per cent of Myer, the retail billionaire’s fashion conglomerate said it remained concerned that Myer shares were trading on an uninformed basis in the lead up to Myer’s strategy day on Wednesday and that Myer must update the market with its first quarter trading results.

Premier Investments, which is chaired and majority controlled by Mr Lew, also blasted Myer this morning regarding its treatment of investors, warning that it “will not accept yet another Myer question and answer session full of hype and management consultant jargon, yet devoid of hard information and numbers.’’

The savage press release also declared that Myer had a poor track record of market disclosure, raising a profit warning issued in March 2015 and an investor briefing in March 2017 where the CEO pledged it could meet its full-year guidance. It later issued a profit warning.

“Premier Investments is concerned that the market is trading on an uninformed basis as a result of deficient disclosure by the board of Myer Holdings,’’ the fresh Premier Investments missive said.

“Premier is considering its legal and other options in order to bring about urgently needed change to ensure that Myer shares are trading in an informed market.”

Mr Lew is now on a collision course with Myer that is likely to hit its climax on Wednesday when Myer chief executive Richard Umbers will update the market on his “New Myer” strategy to turnaround the underperforming retailer, with some investors and analysts speculating this could include a watering down of previously announced long-term sales and earnings targets.

“If the board of Myer intends to announce any material changes to, or an update in relation to the stated targets and current performance of, the “New Myer” strategy, then it should have done so as soon as that information became available to the management team and board,’’ the Premier Investments statement said today.

“Until that information is released, Premier believes that the market has been, and is, trading on an uninformed basis.”

Mr Lew’s Premier Investments is down nearly $40 million on its Myer stake and kicked off a public campaign against the Myer board and its New Myer strategy last month. Mr Lew has accused Myer of losing its way, mostly run by consultants, being a “basket case” and selling some clothes that are so awful they belong in Salvation Army stores.

Premier Investments has repeatedly called on Myer to release its first quarter trading results at the New Myer strategy update on Wednesday, and again this morning raised this point.

“Premier believes that without the benefit of Q1 sales and profit performance metrics, Myer shareholders do not have enough information to assess: The performance of the New Myer strategy (or perhaps, despite the Chairman-designate’s public commitments to the New “New Myer” strategy); or their support or otherwise for the election of new directors, including the Chairman-designate, Garry Hounsell, at the upcoming Myer AGM.’’

The Myer board cannot on the one hand pin Myer’s future on the “New Myer” strategy, yet refuse to inform the market in relation to progress of its implementation, the Premier Investments statement said.

“Premier reiterates that it will be monitoring the Myer “strategy day” on November 1 very closely and again calls upon the company to announce its current sales and profits for the Q1 period compared to last year and expectations, so the market is fully informed when assessing the strategy and the vote is not tainted by poor or misleading disclosure.”