Myer strategy in tatters as CEO Richard Umbers axed

The retailer faces a rudderless few months as it scrambles to find a new chief executive willing to take on a tough job.

Garry Hounsell with Richard Umbers after the Myer AGM in November. Picture: Stuart McEvoy

New Myer executive chairman Garry Hounsell is doggedly clinging to the board’s “New Myer” strategy despite the company failing to hit anywhere near its modest earnings targets, ringing up three profit warnings and presiding over a collapsing share price that culminated yesterday in the axing of department store chief executive Richard Umbers.

Marking another chaotic chapter in the Myer saga that began with its sale and clearly overpriced sharemarket float by private equity owner TPG in 2009, the retailer now faces a rudderless few months as it scrambles to find a new chief executive willing to take on arguably the toughest job in retail.

And it is only set to get worse for long-suffering Myer shareholders. Myer has already warned it does not expect any upturn in trading conditions in the second half — following a dismal first half that triggered its profit warning this month — and is now preparing to unveil a huge impairment to its near $1 billion in intangible assets that could torch its accounts and breach banking covenants.

The exit underscores the difficulties facing legacy department store operators, which are struggling to adapt against online retailers and fast-moving international brands that have entered the Australian market in recent years. Compounding Myer’s problems is a high-cost network of more than 60 stores, many which are locked into punishing long-term retail leases.

But Mr Hounsell, who has taken on an executive role at Myer until a replacement for Mr Umbers can be convinced to take the reins, was adamant yesterday the retailer was not in danger of ­collapse as it braced for the impairments. “I don’t believe there is any risk of going into administration at this particular point in time,’’ Mr Hounsell told The Australian.

He explained that Mr Umbers needed to leave Myer as he and the board were now “impatient” with Myer’s slow pace of the company’s return to profitability.

Former Myer CEO Richard Umbers

Yesterday’s developments drew outrage from Myer’s biggest shareholder and long-time critic, Solomon Lew’s Premier Investments, which put out a statement labelling the sacking of Mr Umbers as a “complete abdication of responsibility” by the board.

It now says it sees the ailing retailer’s “New Myer” strategy launched nearly two years ago as “dead and buried”.

“Mr Umbers’ departure is the latest in a long line of Myer executives jumping off the ship,” the statement said.

“The business has lost all of its retail talent in the past two years, and there is no retail experience of any note on its failed board.”

Mr Hounsell said he would now act with a sense of “urgency” as executive chairman and would be “turbocharging’’ some of the plans formulated by Mr Umbers and his management team, adding that Mr Umbers was not moving quickly enough to repair Myer’s sickly financial state.

He pledged to “lift every rock” at Myer and consider how things could be done differently.

“This needs a change, we need to really lift every rock and look under it to try and see what we can do differently and it is just that I’m going to have an absolutely different sense of urgency than what Richard might have had because he was executing a strategy that he’d embarked upon three to four years ago with the board,” Mr Hounsell said.

“This is about my impatience and the board’s impatience to speed up the execution process and increase our returns to shareholders.”

Mr Umbers’ fate was sealed when he issued his third profit warning last week, with the first profit warning in July costing the job of his deputy CEO Daniel Bracken and a second downgrade in December leading to a reshuffle of senior ranks that resulted in chief financial officer Grant ­Devonport exiting the business.

“The board was disappointed (with the profit warning),” Mr Hounsell said.

“I know management were disappointed and I certainly know our shareholders were disappointed. As I said the board made a decision or step in this instance, we discussed it with Richard and Richard agreed it was probably the right time to step down.’’

It now means the three key architects of the $600 million “New Myer” strategy launched in 2015 to transform Myer and arrest its two decades of flatline sales and earnings have now gone, and the ­retailer is nowhere near positioned to meet the earnings targets set out to investors almost three years ago.

Mr Hounsell yesterday said he and the board remained committed to Mr Umbers’ “New Myer” strategy, despite its failings to date.

“I am comfortable with the strategy, I have said that before, but it is execution and urgency that is the key matter,” he said.

“This is about my impatience and the board’s impatience to speed up the execution process and increase our returns to shareholders.’’

However, a new Myer CEO would be given the ability to take a fresh look at the “New Myer” strategy. “Any new CEO that comes into a business clearly has a look at strategy, they have a look at people, they have a look at all aspects of the business and we would expect that individual to question all elements of the business going forward,’’ Mr Hounsell said.

Mr Lew’s Premier also said Myer shareholders should also be aggrieved that Mr Umbers was being paid 12 months’ salary on his departure.

“Premier repeats its warning that Myer is in peril and needs a ­totally new board in order to have any sustainable future,” Premier’s statement said.

“It is time for all Myer shareholders to unite to save their company from the failed Myer board.”

It is expected that Premier will soon call an EGM, at which it will seek to tip out the entire Myer board.

Myer shares closed up 1c at 54.5c.