Myer boss John King hands troubled board best defence against Solomon Lew

Myer chief executive John King has handed his under-siege board the best defence possible from the slings and arrows of major shareholder Solomon Lew.

Myer CEO John King has returned Myer to profit and is ready for a bumper Christmas. Picture Stefan Postles

Myer chief executive John King has handed his under-siege board the best defence possible from the slings and arrows of major shareholder Solomon Lew by delivering a triumphant return to profitability that has sent the share price racing to a two-year high.

Mr King has also declared Myer was “ready to go” for a big Christmas this year bolstered by pent up demand from shoppers and plenty of disposable income sloshing around in bank accounts and wallets.

The Myer board, which has faced an onslaught from Mr Lew and his Premier Investments for four years, has also strengthened its position by finally elevating its acting chairman JoAnne Stephenson as chairman after a near-12 month search for a new chair and appointed to brewing and foods boss Ari Mervis as a director.

However, despite the better than expected full-year profit unveiled on Thursday, the rocketing share price and the inclusion of a new director with extensive retail experience, albeit not in fashion, it is unclear if that will mollify Mr Lew. The billionaire retailer will release the full-year results for his own company and major Myer shareholder, Premier Investments, next week and could renew his attack on Myer by calling for an extraordinary general meeting to sweep out the entire Myer board.

The pandemic threatens to disrupt the flow of stock to Myer stores. Picture: Bianca De Marchi

Meanwhile, Mr King has set the foundation and platform for what he believes has set Myer on a much more successful and profitable path as he has reduced store space, lightened and improved its fashion and apparel inventory, cut costs and improved its online sales – all as it faced the major disruptions of Covid-19 over the last 12 months.

Myer on Thursday revealed it had bounced back strongly to profitability after a horror 2020, with the retailer unveiling a $46.4 million net profit for 2021 as sales also rebounded despite the disruptions caused by Covid-19. The pre-significant items profit of $51.7m was better than the recently indicated profit guidance of $47m to $50m.

Shares in Myer leapt on the return to profit, although the dividend still remains suspended, rallying 17 per cent before the stock closed up 8.5 cents to 59.5 cents – a two year high.

As it faced store closures around the country due to the pandemic, Myer managed to eke out a sales increase of 5.5 per cent to $2.658 billion.

The annual results revealed that online sales rose 27.7 per cent to $539.5m with online now representing 20.3 per cent of total sales.

The result is a massive turnaround from 2020 when impairments and other one-off hits to the company, including the emergence of the Covid-19 pandemic, saw it post a net loss of $172.4m as revenue fell 15.8 per cent to $2.519m. In 2019 Myer recorded a profit of $24.47m.

The retailer was bolstered by $19m in rent relief and net JobKeeper subsidies of $32m. It didn’t qualify for JobKeeper 2.

Myer said it finished the year with a net cash position of $111.8m, representing a $103.9m improvement on the prior year.

Reflecting on the 2021 financial results, Myer chief executive John King, said the return to profit underlined that the company was starting to see the business thrive despite the extraordinary market conditions.

“Our significantly improved 2021 results, including growth in profitability for both the first and second half, demonstrates the Customer First Plan is getting real traction.

“As we have consistently said over the past three years our focus has been on profitable sales, growing the online business, disciplined management of costs, cash, and inventory, space optimisation and the deleveraging of our balance sheet.”

New Myer board member Ari Mervis.

Mr King said he was expecting a bumper Christmas as pent up demand is released when restrictions are eased, with shoppers unable to travel overseas, the shops open – hopefully – and people ready to spend.

“What we have built is a very solid foundation also proven in our online capabilities, we are now one of the biggest Australian online retailers, so I that is that is only going to get stronger.

“We feel strongly that we have planned well for Christmas, the team have done a great job whether it’s marketing, merchandising, online and product offer, in-store and we are recruiting a lot of people for Christmas so we are ready to go.”

He said Myer was sitting on much healthier inventory levels, which was now 18 per cent of stock six months or older against when he joined the retailer three years ago it was facing bloated inventory of older fashion.

“We don’t have any of that any more, it is all about new and fresh stock coming in on a regular basis and that has been our prime focus.”

Mr King declined to comment if he had recently spoken to Myer’s biggest and most vocal critic, Mr Lew, who is also one of Myer’s biggest suppliers.

He did welcome the appointment of Mr Mervis as a new director, and although the former boss of SABMiller in the Asia Pacific region which gave him leadership of local brewer CUB wasn’t known for his fashion experience it would be a great addition to the board.

“I think he is a highly experienced, capable businessman with great consumer goods-facing experience and I think will be a fresh face just to hold up the mirror around the board table to give us another input, another view of what we are doing which we are really excited about.”