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Solomon Lew savages Myer over half a billion write down

Solomon Lew (right) and Premier CEO Mark McInnes

Premier Investments chairman Solomon Lew has savaged Myer’s leadership team in the wake of its $476 million interim loss on Wednesday, reiterating his calls for the board to be replaced.

As Myer addresses concerns that it may be at risk of breaching its lending covenants after posting another decline in sales and a $515 million write down, Lew has compounded its woes.

“Today’s result provides further evidence, if any was needed, that the Myer Board should be removed and replaced as soon as possible if the company has any hope of surviving,” he said.

Premier, which has lost more than $60 million on Myer after investing in a 10.8 per cent stake in the business last year, is considering calling an extraordinary general meeting to dump Myer’s entire board and appoint three of its own nominees to the Board.

Lew criticised Myer for dodging questions about performance targets set under former CEO Richard Umbers New Myer strategy today, calling the result “terrible news” for shareholders.

“The abandonment of the new performance targets for management that were only re-set at Myer’s Strategy Day in November 2017. If the Board is not holding management to account, what are they doing?” He said.

“They have clearly surrendered their responsibility to shareholders.”

Hounsell was asked on Wednesday about progress on earnings per share targets set out under the New Myer strategy, but he deflected the question, saying that his main priority is short-term profitability as an interim leader while a new CEO is found.

“Hounsell, who is not qualified for the role, is paying himself $1 million per annum to be Executive Chairman amid the carnage he and the Board are creating for shareholders,” Lew said.

Lew added that Myer’s write down and its relationship to its debt covenant triggers was “at best curious [and] certainly unsustainable.”

Myer’s share price had declined by 3.49 per cent to 42 cents by the end of Wednesday trading, despite increasing slightly earlier in the day.

Wednesday was a trying day for the embattled department store, as executive chairman Garry Hounsell endured questions about Myer’s overriding strategy by repeatedly saying that Myer’s new CEO would need to determine solutions.

“The strategy and the new strategy is for the new CEO, it’s not my job I’m in a caretaker role and that’s … purely to drive profitability for our shareholders,” Hounsell said.

Although Hounsell has made several changes since jumping into the role of leading the day-to-day operations of Myer after showing former chief Umbers the door in February.

Hounsell said he had been pushing the Myer team to “trade the business more aggressively” and was rolling out a new strategy that flagged a renewed focus on price, product and service.

The changes have coincided with an improvement in trading in the first six weeks of the second-half, Myer said on Wednesday, conceding that it had invested in price.

UBS analysts said that trading improvements were positive, but there was no mention of medium term targets.

“[second half year-to-date] trading improvement is positive but at the expense of margin, with no mention of medium-term targets. Covenant breach concerns intensify, particularly from the $515m impairment, albeit within [covenants] as at first-half 18,” UBS analyst Ben Gilbert said.

Premier said it will have more to say on Myer in the coming days.

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