Sales losing impact
Myer boss says discounts won’t be pathway to turnaround
MYER chief Richard Umbers says he will not fall back on heavy discounting, arguing traditional sales events such as stocktake clearances are losing their pulling power over shoppers.
Mr Umbers has backed his turnaround strategy for the department store chain, which yesterday cut its profit forecast and took major writedowns on key brands including its failed Topshop experiment, sending its share price to a record low.
The retailer also announced deputy chief executive Daniel Bracken was leaving the business in a trading update that largely wipes out its full-year net profit.
Shares in Myer plunged almost 10 per cent to close at their lowest level since it listed at $4.10 in 2009.
The rout extends the paper loss at Premier Investments, backed by retail veteran Solomon Lew, to $37 million. Premier shelled out $102 million in March to grab a near 11 per cent stake in the chain at $1.15 a share.
Mr Umbers said that in a “persistently difficult” retail environment, consumers had kept wallets and purses closed during Myer’s midyear stocktake sale.
Rival David Jones this month posted its first drop in like-for-like sales, which strips out the effect of stores opening or closing, since it was bought by South African retail conglomerate Woolworths Holdings.
Mr Umbers is two years into a five-year turnaround strategy at Myer.
A key part of the plan is to attract shoppers by creating unique in-store experiences – such as ice skating rinks, an annual Christmas “Giftorium” and appearances by pop icon Katy Perry – rather than by engaging in constant discounting.
Mr Umbers yesterday backed the approach, saying shoppers were wary of “endless discounting” and falling back on one-off promotions would not pay off over the long term.
Myer has cut its target for underlying profit to between $66 million and $70 million for its 2017 financial year, which finishes this month.
It had previously pledged to deliver its first underlying profit growth since 2010 by beating last year’s haul of $69.3 million.
The underlying measure strips out one-offs such as writedowns and restructuring costs.
The retailer also announced it had written off the full value of its 20 per cent stake in Topshop at a cost of $6.8 million.
It will also take a $38.8 million hit on its Sass & Bide brand and absorb $18 million to $20 million in restructuring costs.
The combined hits will likely largely wipe out Myer’s net profit.
The Australian arm of Topshop and Topman fell into administration in May owing at least $35 million.