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Myer drops sales targets, Lew attacks again

myerMyer is committed to dedicated clearance floors in its department stores despite major shareholder Solomon Lew fuming that the old stock would be more at home in a Salvation Army op shop.

Myer executive Tony Sutton told investors at Wednesday’s strategy day that the clearance floors represented a foray into the $4.6 billion “off-price” retail market.

Sutton said off-price was about selling wanted brands at significant discounts, a strategy that has brought success to the likes of DFO and US retailer TK Maxx.

“We see this as a new potential market for Myer and sits adjacent to Myer’s current proposition,” Sutton said.

The commitment flies in the face of Myer’s promises earlier this year to move away from heavy discounting.

Sutton, the executive general manager for stores, said sales for the eight Myer stores piloting the clearance floors over the past six weeks had been positive.

Sales in the last full financial year dropped 2.3 per cent across the eight stores, but – excluding online sales – they had risen 3.7 per cent since clearance floors were introduced.

Sutton said clearance floors had helped US department stores such as Nordstrom boost their sales.

But Lew – the chairman of major shareholder Premier Investments – has been critical of the clearance floors, saying in September the apparel was up to three years old and belonged “in the Salvation Army”.

Meanwhile Myer has dropped the sales targets it set as part of its much-vaunted turnaround plan after unveiling another weak set of figures to investors.

Chief executive Richard Umbers said average sales growth above three per cent between 2016 and 2020 was no longer achievable at the department store chain because of stiff competition and weak consumer spending.

But the chief executive said on Wednesday his co-called ‘new Myer’ turnaround plan remained sound despite a 2.8 per cent decline in first-quarter sales.

“Two years ago when we released the New Myer strategy we did not anticipate the extent of deterioration in market conditions,” Umbers told investors at a strategy day.

“Our ambition of three per cent sales growth seemed appropriate at the time but it doesn’t seem appropriate now.”

Umbers acknowledged it was longer than expected to turn the business around, but said that did not mean it was wrong to focus on young shoppers, popular brands, concessions and targeted closures.

“A tough external environment cannot be a reason to slow down or stop investment for the long term,” he said.

Myer said it would now measure performance against sales per square metre growth, although it has roughly halved that target to “more than 10 per cent” until 2020.

Umbers’ previous target for growth in earnings to outpace that in sales has also been scrapped.

Umbers said the retailer was now focused on what he indicated would be a more meaningful second quarter including the spring racing and Christmas trading periods.

Lew was quick to respond following yesterday’s strategy update and release of its quarterly results, noting Myer has “left the strategy in place despite the very clear evidence that it has failed.”

“Premier also notes the improvement in Big W’s sales performance announced yesterday for the same period,” the company said in a statement.

“Today’s announcements by Myer are final proof that Garry Hounsell is unelectable as chairman of Myer. Hounsell has promised to deliver more of the same failed new Myer strategy, and he will now reward the Myer management team for taking the company backwards.”

Lew – who heads up the parent company of Smiggle and Peter Alexander – is leading a campaign to overhaul the department store retailer’s board.

The retail veteran also commented on Myer’s turnaround strategy, in which Myer chairman-elect Hounsell had previously said was beginning to show “green shoots” of recovery.

“I only see weeds, no green shoots,” said Lew.

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