Solomon Lew unleashes withering attack on Myer

Premier’s Solomon Lew says Myer and its management have destroyed $2bn in shareholder funds.

Premier Investments chairman Solomon Lew and chief executive Mark McInnes yesterday. Picture: Stuart McEvoy.

Premier Investments chairman Solomon Lew has launched a blistering attack on department store Myer, its board and chief executive Richard Umbers for what he described as their culpability in the destruction of more than $2 billion in shareholder funds.

Mr Lew also took aim at the directionless Australian economy and weak political leadership, which was retarding retail growth as energy prices skyrocketed.

He used the presentation of Premier’s full-year results to ­accuse Myer of misleading investors over its financial performance that saw a profit warning in July trigger a near 40 per cent share price collapse.

“Personally, I believe that the company has misled its shareholders and misled the market,” Mr Lew said.

He was scathing of Mr Umbers’ strategy to turn around Myer, saying the department store was mostly run by consultants, selling clothing that consumers did not want.

He said the initiative by Mr Umbers to create “Myer clearance stores” was in fact selling old stock that was better suited for Salvation Army stores.

“They are continually changing strategies. You have seen a revolving door of management and unfortunately a lot of good people have left,’’ Mr Lew said.

“The business is on permanent stocktake sales, mid-season sales and markdowns.

“Having viewed quite a lot of stores … I spend weekends visiting a lot of stores and travelling interstate and you would be horrified if you saw what was really going on out there.

“The share price has gone from $4.10 to 70c — you tell me, is the strategy working?”

A spokesman for Myer declined to comment.

Unveiling Premier’s results, Mr Lew said he was looking offshore to fuel growth for his fashion empire, led by juggernaut brand Smiggle, which is set for a European launch, as Australia’s shaky economy, poor political leadership and stagnant wages growth fences in local profits.

Mr Lew also revealed that the flagship stores for Portmans and Just Jeans at Melbourne’s Bourke Street mall would shut after 30 years of having a presence in the retail precinct.

A spat with landlords over rentals and a switch to a greater online strategy was to blame, but it comes as Smiggle is set to open dozens of stores overseas including up to 50 in Belgium and The Netherlands, which underlines Mr Lew’s overseas pivot.

The withering blast on Myer was classic Lew and reminiscent of his attack on Country Road, which only ended after David Jones bought him out for a hefty price, and sets up a potential war of attrition that could break out again at Myer’s annual meeting in November.

Premier is Myer’s biggest shareholder with its foot on just under 11 per cent of the register.

“I am bitterly disappointed,” Mr Lew said. “If I go back to late 2016, probably around their AGM, they were talking the business up and in fact I think they upgraded their profit at the time.

“Come March they were still talking the business up, notwithstanding they had a poor clearance in January. They didn’t at that point take their writedown or any impairment in the investment in TopShop — they knew exactly what was going on there — and also in Sass & Bide, which of course has probably got another $35 million to write off and massive trading losses in that business.”

In March, Premier scooped up a 10.77 per cent stake in Myer for more than $100m, but the value of those shares has sunk by more than $30m and weighed on the Premier result.

“We are not in the ‘lose money business’, Lew doesn’t like to lose money,’’ Mr Lew said as Premier posted revenue of $1.1bn, up 3.98 per cent, with profit for fiscal 2017 rising 1.21 per cent to $105m.

The result was driven by double-digit sales growth from Smiggle and Peter Alexander.

“Consumers are struggling with higher energy prices and just higher costs generally, and so therefore I think interest rates, mortgage rates will move up … and of course there is the government and leadership,” Mr Lew said.

“Looking at the polls today … what’s running the country here? Is it energy? The yes/no (marriage) vote? Where are we going? There are other important issues that we need to deal with.’’

Premier chief executive Mark McInnes added: “It looks pretty tough out there.

“There are plenty of retailers who have gone out of business ... there are a lot of retailers who are up for sale, and the consumer despite buoyant property prices hasn’t had wages growth, the political environment is very poor ... lack of confidence at the leadership level.’’

This showed up in Premier’s results, which needed Smiggle and Peter Alexander to drag it over the line and deliver a slight increase in group profits.

Smiggle’s sales for 2017 of $238m were up 28.8 per cent through the opening of 58 new stores and solid like-for-like sales in all countries. Smiggle will enter continental Europe by next year and is targeted to hit sales of $400m in three years.

Total sales for Peter Alexander rose 14 per cent to $190.9m.

Portmans sales fell 8.6 per cent to make it the worst performing brand in Mr Lew’s fashion group. Jacqui E was also on the ropes, with its sales down 6.2 per cent.

Buttressing the result was the $170.6m of cash on hand, as well as the stake in appliances company Breville, valued at $383.8m.

Just Jeans posted a 1.5 per cent increase in sales to $216.4m, Jay Jays fell 1.6 per cent to $158.9m, while Dotti was down 3.6 per cent at $110.4m.

Premier declared a final dividend of 27c, up 2c, payable on ­November 17. Its shares fell 35c to $13.40.