Richard Umbers upbeat as Myer sticks to plan

Myer boss Richard Umbers believes stalled national retail sales for July are an aberration, not a retail downturn.

Richard Umbers at Myer’s Bourke Street store in Melbourne.

Richard Umbers, the boss of Australia’s largest department store, Myer, believes stalled national retail sales for July were an aberration rather than the start of yet another slow grind for retailers, and that ‘‘New Myer’’ under his watch would ultimately emerge largely insulated from the prevailing economic conditions.

The comment came as Myer confirmed several store closures to shrink its network, while shelving plans to open new stores in Darwin, the Gold Coast and regional NSW.

One year into Mr Umbers’ five-year turnaround strategy to lift Myer out of a nearly two-decade stretch of shrinking sales and earnings, the former British army officer and Aldi executive argues there is still “money around to be spent in retail’’ and that Myer should be able to capture a growing slice of that spending.

“Whatever the prevailing economic conditions in retail there is always somebody who is doing a great job and getting it right, and I don’t see a reason why the New Myer program doesn’t introduce a resilience to the Myer brand because we are getting it right for customers,’’ Mr Umbers told The Australian yesterday.

“If you are an amazing retailer and have the right offer and the right service proposition then there is money around to be spent in retailers such as Myer, and so I am a big believer that if we can get the offer right we can weather any fluctuation, a normal fluctuation, in the marketplace.’’ The first glimpse of the resilience Mr Umbers is trying to inject into the retailer was evident yesterday as Myer’s bottom-line profit more than doubled to $60.5 million and full-year sales rose 2.9 per cent to $3.289 billion — the first time in its eight years as a public company that it has stitched together consecutive annual gains in sales. After stripping out a series of writedowns and charges from the restructuring program, underlying profit came in at $69.3m.

However, reflecting the mammoth task still ahead for Mr ­Umbers as he shuts down unproductive stores, snares new deals with up-and-coming fashion brands and slashes away at costs, the company’s sales and profit for 2016 were still both lower than Myer’s sales and net profit in 2010.

After outlining several store closures in the past year, the retailer announced further closures yesterday, confirming plans to exit stores at Brookside, Orange and Wollongong in 2017 and Logan in 2018.

As well as Darwin, it will not proceed with planned stores in Coomera on the Gold Coast and Tuggerah on the NSW central coast. Space would be handed back to landlords at Myer stores in Cairns, Blacktown and Castle Hill.

The jump in profitability for the 53 weeks to July 30 was in line with earlier company guidance of a $66m-$72m profit, but just shy of market expectations of a profit closer to $70m. Pre-tax earnings fared worse, slipping 17 per cent to $223.2m as Myer’s rush to fill its stores with more must-have brands via third-party concessions helped boost store traffic and sales, but at the cost of ­margins.

Myer’s former long-serving chief, Bernie Brookes, who retired in early 2015, took a final payout of $4.25m in a mix of salary, entitlements and termination benefits, the Myer annual report released yesterday showed.

Meanwhile, latest economic data suggests his replacement is not going to get any free kick from profligate consumers, with recent ABS Australian retail sales reporting zero growth in July, well short of expectations of 0.3 per cent growth for the month, as department store sales plummeted 6.2 per cent.

“We know that retail sales do fluctuate from month to month, and the ABS data did show July was actually a low month in retail. From our point of view we are cycling last year, which was a spring-clean sale where we shifted out a lot of brands that no longer had a place in our business,’’ Mr Umbers said.

But he was reluctant to concede that the poor July retail sales figures, which were built on dour sales over June as well, could be a harbinger of doom for the Australian retail sector.

“I think you need to see many more months to say there is any sense of a trend there. I suggest it’s more likely to be an anomaly of the particular trading conditions prevailing at the time.”

Those weaker conditions did make their presence felt on Myer’s full-year accounts, as comparable sales growth hit 3 per cent for the year but just 1.8 per cent in the final quarter.

Shares in Myer closed down 2c at $1.275.