Premier Investments chairman Solomon Lew has warned that Myer’s entire future may be at risk amid concern that the struggling department store is on track for a fourth profit downgrade in twelve months.
In his latest attack on Myer since acquiring a 10.8 stake in the business through Premier last year, Lew has renewed his calls for support in a bid to overthrow the board.
“Myer has been on an aggressive sales mode for most of this year and it’s just not working,” Lew wrote in a letter to Myer shareholders. “Worse still, the heavy discounts will blow an even bigger hole in Myer’s losses.”
“We shareholders will pay the price for this incompetence, we have already lost our dividends, and we will also soon be paying higher interest charges and increased bank fees on Myer’s debt.”
“We should brace ourselves for another profit downgrade in the coming months,” he said.
Lew (pictured right) said Hounsell has instituted an “extreme discounting program” since taking the reigns from departed chief Richard Umbers in February and should “at least have the decency” to renounce his executive salary, amounting to $83,000 per month.
Myer is facing the prospect of an extraordinary general meeting in the coming months which will allow shareholders to vote on Lew’s own nominees for the board, amid ongoing concern about the future of the business.
Myer reported a better than expected 3.1 per cent decline in comparable sales for the third quarter earlier this week, but Hounsell warned that fourth quarter profits may be impacted by an unseasonably warm start to Winter.
The result prompted UBS analyst Ben Gilbert to cut his earnings per share (EPS) forecast for Myer by 10 – 16 per cent in FY18-20, amid increased risk that Myer could breach its banking covenants.
But Lew said on Friday morning that Hounsell’s weather explanation was a poor excuse that demonstrated how little he knew about retail.
“Hounsell is also trying to soften us up for another bad sales and net loss announcement ahead, saying the weather has been to warm in May,” Lew said. “Too warm? He must not have been outside for weeks! The weather has been great for retail during May, and industry feedback is that other retailers have had a stunning Mothers’ Day sales result.”
Hounsell admitted in March that while he was “not one of the world’s greatest retailers”, he “knew how to make money”, but Lew believes his “New, New Myer” strategy had rewarded management for taking the company backwards in recent months.
“Hounsell’s lack of money-making expertise is about to be demonstrated in embarrassing detail. He will have to announce both a downgrade and a full year loss, all of which has occurred under his stewardship,” Lew said.
Lew provided no commentary on Myer’s new chief executive John King’s capabilities, but said that he would be “saddled with the same failed board”.
He, once again, used Myer director Julie-Ann Morrison as an example, claiming that she has overseen the destruction of $200 million in value from Myer through the Sass & Bide acquisition and operational losses.
“What can the new CEO learn from Morrison – how to burn money?” Lew said.
Myer declined to comment.
More to come.