It was meant to be a glitzy retail flagship located in the heart of petrodollar paradise. In July last year, leading designers including Wayne Cooper and Leona Edmiston were queuing up for a slice of the floorspace in Myer’s gleaming new Dubai store in the Ibn Battuta Mall.
Myer Dubai was meant to open in October this year. But the department store giant’s Middle East expansion plans, announced in a blaze of publicity, are now in grave doubt. Last week, Dubai was effectively handed a $US10 billion bailout by the UAE, following the collapse in oil prices over the last year. Property prices have tanked in what was once considered the region’s oasis, with developers, including Myer’s 50-50 joint venture partner Nakheel, failing to stump up cash. Dubai’s stock market has lost 70% of its value, with the long-term viability of the skyscraper-heavy metropolis under a cloud.
When the Dubai plans were announced, enthusiastic Myer chief Bernie Brookes relayed his vision of “an international-class department store”. We will be “a small but significant player [in the UAE]. Myer is one of the most iconic brands in Australia and we are proud to be taking it … to the rest of the world.”
But when Myer’s full year results were released in December, the language had changed, with the company saying the venture “could lead to the establishment of a joint venture, with limited financial exposure to Myer.”
Now, the global push looks to have been delayed indefinitely — a number of suppliers, including Rosemary Masic of fashion label Nevenka, told Crikey they hadn’t heard anything since the announcement last year, despite being promised space in the new stores.
Myer also envisioned a further four outlets elsewhere in the UAE and Eastern Europe, a plan that now looks fanciful.
In an emailed statement provided to Crikey, Myer communications chief Mitch Catlin said that, “given the current global economic difficulties, we think there will be a push-back in timing which is understandable in the environment. In terms of Eastern Europe, this was always part of a longer term growth plan and this continues to be the case.”
But as conditions worsen, Myer’s global blueprint could be gathering dust for some time. Although retail sales in the UAE are tipped to increase by 12% over the next two years, according to a study released in December, subsequent events have shaken confidence, with the desert capital said to be close to economic collapse.
Nakheel, which owns the Ibn Battuta Mall, is owned by state-backed property and racehorse overlords the Makhtoum family, the effective recipients of last week’s $US10 billlion bond issue. The firm has hit the headlines in the last few days, with the venerable Financial Times alerting readers to its enormous problems paying contractors and suppliers. Two Australians linked to Nakheel are also in jail in Dubai after the UAE claimed they were involved in bribes relating to Gold Coast property spruikers Sunland.
In December, Nakheel’s development arm, Nakheel Properties cut 500 staff, or 15% of its workforce, and abandoned a number of high profile projects including the $US790 million Trump Tower monstrosity. Locally, it has a 10% stake in Mirvac and is a partner in Mirvac’s bid to develop the Bangeroo project in Darling Harbour, a bid which now seems likely to fail as Mirvac’s share price tumbles.
Retail analyst Rob Lake said he wasn’t surprised Myer’s plans were under a cloud, with investment in the Middle East slumping to lows that would have been unheard of a year ago. But closer to home, the picture for Myer seems somewhat rosier, with growing evidence the firm is set to reap the dividends of the Rudd government’s stimulus packages.
Tuesday’s small rise in retail sales indicates that Australians who used the December stimulus package to pay down credit cards might be again racking up department store debt in anticipation of the extra $900 set to hit bank accounts in under two weeks.
Myer has also embarked on a program of cost-cutting, with staff sacked in some stores and part-time hours pared back. The company has also been bolstered by a soft enterprise-bargaining agreement with the shop assistants’ union, which allows the company to repeatedly slash hours by 20%. Last year Myer eliminated 20 marketing positions to cut costs and please its private equity backers.
In February, Myer announced that first half sales had declined 3.7% to $1.762 billion, in line with analysts’ expectations. But Myer’s expectations of global domination appear to have evaporated long ago.