More bad news for struggling retailer

Department store Myer has been booted out of the S&P/ASX200 index in a quarterly overhaul after a 60 per cent share price fall over the past 12 months.

The fact that Myer is no longer valuable enough to command a place among Australia’s 200 largest listed companies speaks both to the mismanagement of the business and to the pace of digital disruption.

Shares in the retailer have fallen 88 per cent since private equity investors sold it off and relisted it on the sharemarket in 2009. They have never closed above their A$3.84 IPO price and on Friday closed at a dismal 43.5 cents.

Among those companies elevated to the ASX200 this quarter was NZ accounting software company Xero, which recently delisted from the NZX. In fact, after last year’s 90 per cent share price rise, Xero was large enough to be promoted to the ASX100. It took the place of newspaper publisher Fairfax Media, another company that has been blindsided by the rise of the internet.

Myer’s latest fall from grace is another blow after chief executive Richard Umbers was forced out in February following the retailer’s third profit downgrade in eight months.

The century-old bricks and mortar retailer’s turnaround strategy simply isn’t working and it hasn’t been able to staunch a loss of sales. Its market value has fallen to less than A$360 million ($388m), while the value of online competitors has surged.

Online retailer Kogan.com, for instance, was founded by Ruslan Kogan a little more than a decade ago when he was aged 23 and the company is now worth A$820 million.

While Myer searches for a new chief executive, the company is also under attack from within.

Billionaire Solomon Lew owns about 11 per cent of Myer and plans to call a shareholder meeting to oust the current board if he can win sufficient support from institutional holders. If Lew gains control of Myer, it might just be the company’s best chance of survival.