In the washup of the two presentations this week from Coles and Myer, I can’t find anything in praise of the Coles board and leadership, nor anything critical of the new people at Myer.

The retail commentariat was critical of Coles after their Monday shout. However, their dismay didn’t really peak until yesterday’s Myer presentation demonstrated what untapped potential was in the business, and the simple things that could extract it. Almost every article mentions retail 101.

When Coles sold Myer for $1.4b, the board was praised for its brilliance in achieving such a high price. Not only had Coles amputated a limb that had been diagnosed as gangrenous, they had fetched a pretty penny for it.

Now it appears it was the buyer who got a bargain. When the proceeds of the sale of the Myer Melbourne real estate and the estimates of earnings in the near future are factored in; TPG Newbridge picked up Myer for five to six times earnings. Now consider the multipliers should Myer (as would appear likely) grows to sales of $4b, with further improvement in the cost of doing business.

Yesterday, before the Myer show, some were arguing that Coles is in a poorer bargaining position. I’m not so sure. What the Myer numbers clearly demonstrate is that Coles can be turned around with the right leadership. Others suggest that other Coles businesses may not be as run down as Myer. It is my strong belief that the remaining brands are every bit as damaged as the old Myer, sharing some unique and many parallel issues.

As happened at Myer, the simple fact of a change of leadership will bring about renewed excitement. That lift in morale will provide a solid platform on which to build a new culture.

The body language from Allert and particularly Fletcher during Monday’s presentation was tragic. I suspect it was worse yesterday as they learnt of the Myer result. Who knows how they are today.

However, shareholders can feel a little better this morning in the knowledge that the new owners and leaders of Myer have demonstrated to the market that Coles is a genuine renovator’s opportunity that with a lick of paint and some steam cleaning can shine again.

And this should push the price up.

Old jokes’ home.

A surgeon on a post-operative visit to a patient says there is good news and bad news. The bad news is that there was an error in theatre and they cut off the wrong leg. The good news is that the bad leg will get better by itself and doesn’t need amputating.

Peter Fray

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