Myer’s largest shareholder has slammed the business’ current board over its $486 million loss in the last financial year, calling for chair Garry Hounsell to step down.
On Wednesday, department store giant Myer has reported a net loss of $486 million for the 2017-18 financial year, continuing its trend of downward profits since its 2009 listing on the ASX.
Myer’s total sales fell 3.2 per cent while its operating gross profit dropped 2.9 per cent for the year – figures the company’s chair Garry Hounsell has described as “disappointing”.
In response to the loss, Premier Investments’ (Myer’s largest shareholder) chair Solomon Lew delivered a scathing assessment of the department store’s senior management team.
“Sales are down. Profits are down. Service levels are down. Cost of doing business has increased. Dividends have ceased,” Mr Lew said.
“The board of Myer is an absolute disgrace.”
Mr Lew said Myer was being run by the business’ bankers, who he said had “taken a security charge in front of staff, suppliers, landlords and other creditors”.
Particular reference was given to Mr Hounsell’s role in the loss.
“Garry Hounsell today admitted that Myer shareholders deserve better. For once, Mr Hounsell, we agree. Since Mr Hounsell took up his role, Myer’s share price has halved,” Mr Lew said.
“Meanwhile, Myer shareholders have spent the last year paying for Garry Hounsell’s retail traineeship. Mr Hounsell must step down immediately or risk having his board spilled by a strong shareholder revolt at the upcoming AGM.”
But IBISWorld industry analyst Kim Do said the results weren’t surprising. The loss was the culmination of trends in the department store sector, she said.
They included increasing competition from specially stores and fast fashion outlets – the success of which suggested Australian consumers were looking for better deals.
“This competition means consumers are able to compare their options, especially with clothing, and choose the store that offers better value,” Ms Do said.
She said Myer was also feeling the effects of market polarisation – with consumers choosing either cheaper goods or luxury brands, and cutting out “mid-market” brands.
Myer rival David Jones has also suffered, Ms Do said, but its positioning as a higher-end retailer meant it didn’t take as big a hit.
However, she said Myer was moving to become more competitive.
“Myer are looking to position themselves as a mid-market retailer, which is surprising given the market polarisation we’re seeing. But it’s better than trying to dip their toes into everything,” Ms Do said.
“They’re also shrinking sections of their stores that are underperforming – like homewares, where they just can’t compete with businesses like Kmart, or even David Jones.”
Consumer and retail business consultancy Retail Doctor Group also said Myer’s plans for the next year, outlined in its statement to the stock exchange, appear to be on the right tack – if they were handled successfully.
“Their goals are fantastic; it all looks very good, but they have to actually do it,” Retail Doctor Group advisory board chair David Kindl said.
“It’s great to focus on something, but until you see that on the floor it’s hard to comment on it. Myer has a lot of internal issues it still has to sort out.”
Nevertheless, Mr Kindl said the outlook for businesses like Myer was improving.
“They’ve got a lot of competition; right now those specialty stores are winning that battle but there’s no reason department stores can’t fight back and claw back some of that wallet share,” he said.
“The people running these businesses are smart and competent, I’m sure they’ll get there, but it’s going to be difficult.”
At the time of writing, Myer’s share price had dipped 4.14 per cent since the opening of the market.