Myer answers critic Solomon Lew with a promise of profit

Myer has responded to growing demands and threats by major shareholder Solomon Lew by flagging a return to profit, sparking a share surge.

Myer has unveiled a return to profitability. Picture: Andrew Henshaw

Department store owner Myer has hit back against the avalanche of accusations and threatening legal letters streaming from its biggest and most aggrieved shareholder, billionaire Solomon Lew, with a triumphant announcement that it will report a profit in the June half for the first time since 2017.

After Mr Lew earlier this month demanded that Myer release a trading update, given its financial year ended in July and many other retailers had also updated the market about their 2021 performance, Myer has relented and revealed a return to profitability despite the Covid-19 pandemic.

Traditionally Myer has not provided a market update between the end of its financial year in July and the release of its full-year accounts in September and it has taken the unusual step of ­issuing the unaudited accounts.

Myer CEO John King says the chain is on track to almost double its pre-tax earnings in 2021. Picture: Stefan Postles

It is unclear if this move will silence Mr Lew, who has been waging a pitched battle against the Myer board since 2017, or merely encourage him as he tries to remove the Myer board later this year at the AGM.

Either way, investors were pleased with Myer’s return to profit and pushed the shares 10 per cent higher before it closed up 4.5c at 51.5c.

The nation’s biggest department store is on track to almost double its pre-tax earnings in 2021.

The pivot to online shopping during the pandemic has boosted its online stores which now accounts for 20 per cent of total sales.

Myer issued a trading update to the market on Thursday saying it expects to return to June-half profitability for the first time since the June half of fiscal 2017 despite significant Covid-19 impacts.

It said unaudited 2021 results showed total sales up 5.5 per cent to $2.658bn with second-half sales up 38.3 per cent compared to the second half of 2020.

Group online sales were up 27.7 per cent to $539.5m, representing 20.3 per cent of total sales.

Myer expected EBITDA between $174m and $179m, compared to $93.5m in fiscal 2020.

Solomon Lew has been piling the pressure on Myer’s board. Picture: Aaron Francis

Mr Lew, whose Premier Investments is Myer’s biggest shareholder with a stake of 15.77 per cent, has been demanding that Myer release a trading update as he seeks to sweep out all its non-executive directors and replace them with his own hand-picked nominees at the AGM.

He has followed this up with threats to call an EGM to tip out the board unless the AGM is delayed so Mr Lew could properly assess the full-year results when they are released in September, and also a letter from his lawyers at Arnold Bloch Leibler this week that threatened action if Myer ­attempted to raise capital and ­dilute Premier Investments’ stake.

Myer had remained quiet on the issue of a trading update but now has decided to release an update based on preliminary, unaudited results.

Myer said it was expecting second half profit of between $4m and $7m and a full year net profit between $47m and $50m, compared to a loss of $11.3m in 2020.

The retailer said the 2021 preliminary results were negatively affected by lockdowns, store closures and travel restrictions, particularly in the first and fourth quarters.

Myer finished the year in a positive net cash position of approximately $112m compared to $8m at the end of fiscal 2020, with significant headroom in all of its debt covenants.

Myder chief executive John King said: “Our ‘customer first’ strategy continues to gain momentum, delivering a significantly improved full year profit result, despite the ongoing Covid impacts in 2021.”