We are again going to reiterate that unlisted suppliers to Myer tell us that Myer are cancelling orders, particularly in clothing. These contacts believe “sales” are not working as everyone is on “sale,” and they believe we are on the cusp of “fire sales” across the discretionary retail space as 30 June approaches (ie tell your wife to wait!). We continue to urge extreme caution on all forms of domestic retailing, and that includes Coles Myer (CML -0.9% to $8.72) and Billabong (BBG -1% to $11.30).

For all the positive stuff written about CML CEO John Fletcher, we think he made one critical mistake for CML shareholders. That mistake was not spinning off
Myer last year at the peak of consumer spending, the peak of Myer earnings, and the peak of retail multiples. He missed the window, and it will be seen through time as a strategic error.

The cynic in me continues to believe all the positive investment bank research on CML was to get a role in any CML spin off. Perhaps as that likelihood fades, so will the
recommendations on the stock. We continue to recommend selling the expensive and leveraged CML, and we think a switch to BHP will be extremely rewarding on an 18 month view.