Myer treads water
Bernie Brookes, Myer CEO, has forecast a lift in the performance of the department store group this financial year as more store development projects are completed and strategic initiatives gain traction.
Despite this, investors and retail analysts are starting to question Myer’s five point strategic plan, with sales stalled and earnings under pressure as costs rise.
While the strategic plan was endorsed in an external review by Bain & Co in 2013, Myer has been unable to show any tangible signs of success in its trading results in the past three years.
While David Jones achieved some traction from its blueprint for future growth in the 2014 financial year ahead of the Woolworths South Africa takeover, Myer is expected to report another year of flat sales and a fall in earnings for the same period.
Brookes’ call for patience from investors demanding improved trading results is now being undermined by concerns about management depth and the execution of the strategic plan.
Myer recently lost another key executive, with Megan Foster quitting her role running standalone stores.
Foster’s departure was not publicly announced, in part, because Myer recognised it would spark further questions about the future direction of the company and Brookes’ personal plans following the failed David Jones merger bid.
Foster is part of a procession of senior executives to have left Myer since the department store group in the past two years.
Other executives who have gone include Nick Abboud, who is now CEO of Dick Smith; Graham Dean,CEO of Harris Scarfe; Penny Winn, director of group retail services at Woolworths; and Judy Coomber, who heads Peter Alexander at Premier Retail.
Adam Stapleton and Greg Travers are also among the senior executives to have left Myer. Foster was one of the senior executives featured in the prospectus for the Myer float in 2009 and had key roles as Group GM for marketing and brand development, as GM for store concepts and design and in 2013 as CEO for Sass & Bide, the fashion label acquired by Myer.
Fosters’ departure leaves just one woman in a senior retail operational role at Myer with Nicole Naccarella as Group GM for women’s fashion.
Recent new appointments at Myer have raised eyebrows because they have no department store retail experience.
Myer senior appointments include Gary Williams as executive GM strategic planning and business development; Richard Umbers as chief information and supply chain officer; and Daniel Bracken as chief merchandise and marketing officer.
Williams has formerly worked with Coca-Cola Australia and Westfield, although given an elevated title and reporting structure, effectively replaced Andrew Flanagan, who is facing fraud charges over his bogus resume, in the strategic planning role.
Bracken has past experience as CEO of the Apparel Group, while Umbers joined Myer from Australia Post after earlier career appointments with Aldi in the UK and Woolworths.
When the appointments of Umbers and Bracken were announced in June, Myer was also forced to publicise the departure of Adam Stapleton, executive GM merchandise.
Along with Abboud and Foster, Stapleton was one of the senior executives touted as possible replacements for Brookes, who was due to complete a five year contract as CEO this year. Brookes extended his tenure earlier this year as Myer pursued the David Jones merger proposal, and will now continue in the role for the foreseeable future.
What’s to come
While analysts regard Brookes highly, his appointment as CEO of Myer surprised the industry back in 2006 because his retail experience was in supermarkets with no exposure to department store retailing.
He was able to improve Myer’s profitability by cutting costs in the early years after Myer refloated on the Australian Stock Exchange, but sales growth has proved elusive despite new store openings, refurbishment of major stores, the development of online sales, restructuring of merchandise ranges, and heavy investment in loyalty marketing.
Most analysts believe that Myer’s senior management lack department store experience and that Brookes should have bolstered the ranks with retailers from overseas in the same way Wesfarmers did when rebuilding Coles, or Woolworths has done with Masters Home Improvement.
In the short term, Brookes, his management team, and the Myer board will have to provide a comprehensive update on the strategic direction of the department store in the wake of the failed David Jones merger bid and its subsequent takeover by Woolworths South Africa.
Patience with Myer is strained, especially with shareholders who saw their initial investment in shares in 2009 fall on day one of stock market trading and have not recovered since.
With the expectation of more muddling results for the 2014 financial year to be announced next month, Brookes faces the challenge of rebuilding confidence in the retailer, a job that would be made all the more difficult if he is to announce that he is stepping down in the near future.
Myer is vulnerable to a takeover, and there has been considerable speculation about Solomon Lew launching a bid after his pay day on the sale of his David Jones and Country Road shareholdings.
Inside Retail PREMIUM understands Lew is concerned about the future of department stores generally, particularly the costs that would be associated with reinvigorating Myer above the initial purchase price.
Lew and other industry observers believe Myer’s new store development program has weakened the retailer and will prove an ongoing drain on earnings.
Harris Scarfe has already indicated it is interested in taking over some Myer locations, with the expectation that Brookes or his successor will be forced to cull the store network.
While there has been speculation that former DJs CEO, Paul Zahra, could replace Brookes at Myer, he is thought to be more interested in moving overseas to continue his retail career.
Mark McInnes, who Zahra replaced at David Jones, is arguably the only Australian retail executive that could conceivably step into the CEO role at Myer, but that prospect would depend on whether or not Lew has the appetite to invest in the becalmed department store chain.
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