Myer stalker Solomon Lew declares war on retailer

Two of Myer’s biggest shareholders have criticised the company’s lack of retail experience on its board.

Premier Investments’ Mark McInnes and Solomon Lew. Picture: David Geraghty.

Embattled department store Myer was facing a war on two fronts last night after its biggest shareholders, billionaire rag-trader Solomon Lew and fund manager Anton Tagliaferro, criticised the retailer for its collapsing earnings, strategic missteps and lack of retail expertise on the board.

The stinging assessment that goes to the heart of Myer chief executive Richard Umbers’s turnaround strategy now threatens to break out into open warfare at its annual meeting in November, when Mr Lew is tipped to lash chairman Paul McClintock and directors for what he cites as the destruction of $2 billion in shareholder funds.

The fuse was lit yesterday when Mr Lew’s Premier Investments revealed it had requested from Myer a copy of its share register to consider writing to shareholders in relation to any resolutions proposed at the AGM.

It marks a ratcheting up of the pressure on the board that could eventually lead to Mr Lew demanding a board seat and more control over Myer’s direction.

The looming war and possible takeover by Premier, or another suitor, put a rocket under the Myer share price yesterday as it leapt 5c to 77.5c.

Premier seized a 10.8 per cent stake in Myer in March and has since lost nearly $40 million on the investment, with Mr Lew saying the department store had lost its way, was selling old stock no one wanted and was mainly run by consultants.

Investors Mutual, with a stake of 10 per cent, has joined the scuffle. Mr Tagliaferro, its investment director, has also called for more retail experience on the Myer board, and declared his own disappointment over the retailer’s profit warning in July that sent its shares plummeting.

“We believe the retail environment is fairly challenging, and there are lots of moving parts, and yes I don’t think a bit of extra experience — proven retail experience — on the board would go amiss,’’ Mr Tagliaferro told The Australian.

“It is fair to say we are in discussions with the company about our opinion.’’

Mr Tagliaferro said Myer was in the midst of a turnaround strategy that had proved “disappointing in the last six months’’.

“There is no doubt as shareholders like him (Mr Lew), all shareholders, are a bit disappointed with the performance of the share price in the last few months. “It doesn’t seem the strategy is working out as initially planned.

“We are disappointed too, with the share price in particular … and also there is some disappointment that the turnaround strategy and the targets that were put in place a couple of years ago ... (it) looks like the company will fall short of them.’’

Mr Lew and Mr Tagliaferro speak for just over 20 per cent of Myer and could cause major disruption if they joined forces in a clean-out of the board. Incoming Myer chairman Garry Hounsell, recently appointed to the board as deputy chairman, has no retail experience with only three others on the board having held retail roles.

Chairman Mr McClintock faces re-election at Myer, with Mr Hounsell’s appointment also to be voted on, and it is these resolutions where Mr Lew could use his large shareholding to destabilise the board.

On Monday Mr Lew scoffed at the old stock Myer was selling at its recently launched clearance stores, saying it was more fit for sale at the Salvation Army.

Mr Tagliaferro took a cheeky swipe at these comments yesterday, showing perhaps he wasn't totally in synch with Mr Lew.

“I can’t really comment on the clearance sales and whether they do belong at the Salvation Army or not, because I don’t go to the Salvation Army obviously as often as Solly does.”

Alphinity Investment Management portfolio manager Bruce Smith said the reason Premier bought into Myer in the first place, paying more than $100m for the stake, was never clear but the retailer might soon be dragged into corporate action.

“Asking for the (share) register suggests they are gearing up for some sort of action, maybe to gather support for a move on management, maybe to make a bid,” Mr Smith said.

“Buying Myer would not be without risk for Premier, after all there are no hard assets any more so buying the whole company would involve taking on a lot of liabilities, long leases on stores, some of which don’t seem to make money.

“The recovery program for Myer seems to rely on closing stores. They could certainly afford to do it, Premier still has a fair bit of cash, but that doesn’t mean it would be value accretive for Premier shareholders in the long run.”

Mr Lew has form in running wars of attrition against company boards. He spent nearly 17 years ambushing former ASX-listed retailer Country Road at its AGMs until he was finally bought out for more than $200m by Country Road majority shareholder Woolworths of South Africa.