Myer chief Bernie Brookes is a man of many excuses. In his latest outing to justify another poor profit result, he blamed customers skittish about the economy and wary about interest rates going up.
Nonsense. In the eight years since Myer was sold by Coles Myer to private equity outfit TPG Capital, annual sales have remained static. In fact, at roughly $3.1 billion, annual sales are about the same as they were in 2005,when the business reported its last full-year results under Coles Myer, despite a brand-new Myer Melbourne and six additional stores. Taking into account inflation and store growth, in real terms sales have been going backwards at an alarming rate.
Profit has decreased every year since the business was floated by its private equity owners in 2009. The initial boom in profits post takeover was mostly due to aggressive cost reduction, and today there are few opportunities to cut further. This is very worrying for investors who forked out $4.10 per share based on a shiny prospectus laden with images of Jennifer Hawkins that promised to bring magic back to a once grand dame.
Myer probably lost its way in the late 1970s or early 1980s. There have been several strategy reinventions since the merger with Coles in 1985, but that fateful deal was really the start of a long, slow decline into fashion irrelevance.
Relaunch strategies have taken Myer upmarket and downmarket, and it has replaced the department-store staple of cosmetics at prized city store mall entrances with mobile phones and stacks of microwaves. It struggled through the growth of specialty retail and now looks lost and beaten in the face of the online shopping boom. Not even Brookes’ much hyped “omni-channel” approach — whatever that is — seems able to save it.
One thing Myer does well is confuse its customers. On one hand there’s Jennifer Hawkins strutting down the catwalk wearing a high-end designer label that might be available in two or three stores, while the reality of shopping in an average Myer store is less designer and somewhat different. There’s the marquee at Flemington bursting with celebrities and fashion shows featuring big-name international designers, but the reality that most customers see is stores stocked with mid-market brands that are always on sale.
Myer continues to aggressively push private brands, which now account for roughly 20% of total sales. Myer uses them as a lever to drive more profitable sales, promotes them heavily in catalogues and other advertising — often to the detriment of national and international brands that people know and trust — but this approach can add to the perception that the retailer lacks excitement.
“Brookes’ inability to establish a clear successor is a glaring and ongoing issue, made worse by losing many potential successors to other brands …”
Despite all the bad news, in the past eight years there have been many improvements at Myer. There’s a fast and effective supply chain that gets goods from Asia into stores more quickly at lower cost, a new merchandise system, a new point-of-sale system, a new Myer Melbourne and improvements in supplier management. Many of these changes were driven by Brookes and his former chairman Bill Wavish, who left the brand and has since gone on to play a role in the revitalised Dick Smith chain.
Despite the fact that Myer was the neglected child in the former Coles Myer stable, many initiatives the current Myer leadership likes to crow about were actually launched in the dying years of Coles Myer ownership. The immensely successful Myer One loyalty program, which now accounts for more than 70% of all sales, the stronger-performing private labels Basque, Blaq and Vue, the template for the current store upgrade program, which was based on a remodelled Myer Chadstone, and even the “Myer is My Store” marketing tagline were all conceived under the often criticised reign of former managing director Dawn Robertson. It’s telling that there has been no significant reinvention of marketing or brand positioning in eight years. In fact, probably the biggest change Myer has made to its marketing is to move from all red in its Stocktake Sale advertising to a multi-coloured scheme for catalogues, newspaper ads and in-store visual marketing. Not that the change has worked: the once mighty Stocktake Sale, when people queued overnight and lined up in their thousands, is now just another ho-hum sale on a very crowded calendar of sales and heavy discounting.
In the past eight years, there have been plenty of missteps. Buying and rebranding four Harris Scarfe stores to drive growth and then closing two of them. The ill-fated merger of equals with David Jones — which effectively kicked off the process in which Myer’s major competitor was swallowed by Woolworths — was a mess and now poses a significant set of new challenges for Myer.
Brookes’ inability to establish a clear successor is a glaring and ongoing issue, made worse by losing many potential successors to other brands, including former stores head Nick Abboud to Dick Smith, former merchandise head Penny Winn back to Woolworths and even the recent departure of Megan Foster, who had a succession of high-profile roles but who left the business in August this year. No announcement about her departure was made to the ASX, because she was not considered by the company to be key management personnel anymore, much to the shock of many Myer watchers who were expecting her to emerge as a potential successor to her boss. And then there was the Andrew Flannigan recruitment debacle, the new leadership appointee who faked his CV and convinced his new boss of his bona fides despite having little or no retail experience, who lasted less than one day. Makes you wonder what they talked about in his interviews. Brookes has lost most of the names touted as possible successors over the years, and his recent hires have brought in good skills but few retailers, which is a significant issue given the calibre of people David Jones’ new owners are bringing in.
Myer can be saved and can succeed. More than anything, it means new leadership. Given the clearly evident turn in market sentiment after the last result, the never-ending litany of excuses and blame and the general lack of direction or a realistic plan for the future, that’s probably on the cards.