Going, going, gone. Yesterday brought the news that long-standing Myer chief Bernie Brookes was finally stepping down. A nine-year tenure for a CEO is unusual, and Brookes himself had flagged an earlier retirement last August, leading plenty to ask in recent months just when and if Brookes would be going. Myer’s denials have been, well, rather robust.

Take this comment from Brookes himself to Crikey sister site SmartCompany in September, when he said he’d stay around for a “few more years” as there was “a tonne more to do”. Or this comment from Myer PR to The Australian, which in November reported on gossip Brookes was leaving:

“Any speculation of a discussion by the Board about the ­departure of the Myer CEO after the AGM is completely untrue … Bernie Brookes was reappointed in February this year. The annual report published last month ­contains the details of Bernie’s contract and the following words from Myer chairman Paul McClintock: ‘The Board considers Bernie’s ­passion for Myer and his strong leadership will ensure the business is well placed to achieve its potential’.”

Companies like Myer have continuous disclosure obligations to the sharemarket, which can make the announcement or confirmation of significant departures tricky. But is there no solution other than misleading journalists who get a whiff of something? — Myriam Robin

Uh, oh, Myer’s conducting a strategic review. Myer is conducting a strategic review of the company, which means the board has no clue about fixing the problems that seem to be endemic in the weak retailer’s recent performances. Was removing CEO Bernie Brookes part of that review? It’s not that Myer’s woes haven’t been there for all to see — big spending on expansion and store refurbishing that have drained cash flow instead of performing their usual trick of boosting topline sales revenue, and then same-store sales growth, and then profits. Weak management and too much time and money spent on fashion events and horse racing seem to have diverted the company and the board’s attention from the real business of retailing — selling goods to customers. — Glenn Dyer

Myer discovers customers. The news from the review isn’t comforting for investors — years and years to wait for a return to a “profitable, sustainable” future, according to chairman Paul McClintock:

“It has become clear that to thrive in a modern retail environment, Myer must adapt more quickly and be closer to its customers. A strategic review has been ongoing for some time, with a view to reshaping the business for a profitable, sustainable future … Based on this work it has become evident that a transformation project of the scale required to achieve the board’s vision will take a number of years to implement.”

Just what this “transformation” will mean is not certain at the moment. The company said only that it had conducted lots of research and ran focus groups, after which it decided to become more focused on its customers. First they have to find them, as fewer and fewer of them have been shopping at Myer for quite a while. This raises the question: where has the board and management been since it floated in 2009? The first rule of retailing is “know your customer”. If Myer can find them, will it know what to do with them? Myer was priced at $4.10 in the 2009 float. Yesterday it was trading around $1.65. — Glenn Dyer

Learn from Kmart — seriously. Myer’s miserable track record can be seen from a quick look at its earnings before interest and tax (EBIT), which have fallen since 2010. In that year EBIT was $270 million (those were the days), which fell to $259 million in 2011, to $230 million in 2012 and dropped to $215 million in 2013, and then to a miserable $160 million in 2014. And 2015? We will know on March 19, but the portents from yesterday’s events aren’t good. Management of Myer though can learn from a rival — Kmart (which the old Coles Myer used to own and almost closed). It is the best performing retailer in the country, especially in the six months to the end of December. Kmart’s earnings grew 11.2% to $289 million for those six months. Back in 2010, interim earnings before interest and tax were $154 million. Sales in the latest half grew 5.3%. Sales in the second quarter rose 7% on a topline basis and a solid 3.4% on a same-store basis, refuting industry claims of a weak Christmas period. Return on capital employed jumped to 29%. So did expanded profit margins and higher returns. So why a strategic review when it’s easy to find the answer? Myer just isn’t selling enough goods to enough customers to make a profit. It can be done — just visit a Kmart store. — Glenn Dyer

Bears’ delight #1. Our old top loser, Vocation, the wobbling education services company, posted a $273 million first-half loss for 2014-15 after all those impairments revealed last month. The loss was a bit worse than the $1 million loss for the first half of 2013-14. The result was due to the $241 million in impairments linked to problems with the company’s Victorian businesses. Vocation shares fell on the announcement, dropping 5.56% to 8.5c. Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) fell 11% to $1.6 million. and excluding one-off costs, Vocation reported an underlying loss of $6.8 million for the half-year to December 31, and an EBITDA profit of $2 million. The company said it expects to increase underlying EBITDA to $10 million for the second half of 2015. But first it has to survive the current talks with its gimlet-eyed banks and looming asset sales. By the way, the market’s not confident, Vocation shares hit an all-time low of 8.3 cents yesterday during trading. — Glenn Dyer

Bears’ delight #2. And then there’s Salmat, the outsourcing services company (call centres, mail etc). Its interim result last week was one of the shocks of the half-year (after Woolies’ earnings fall and weak forecast). Salmat shares plunged 30% in two days on February 24 and 25, before a rebound up top yesterday halved the loss to around 15%. The shares fell from $1.44 on February 23, to a low of $1 the next day, before recovering to $1.205 at the close yesterday. That’s well below the $1.90 it floated at back in 2002. The reason for the sell-off? A weak result, a big impairment loss and the decision to drop the interim dividend (7.5 cents a share paid previously). Earnings before interest, tax, depreciation and amortisation fell 67% to just $4.7 million, on revenue up 9.2% to $253 million. But the surprise impairment loss of $64.6 million, “relating to goodwill within the Customer Engagement Solutions (CES) division”, contributed to a first-half net loss of $69.7 million. And then there was the decision not to pay a dividend: the company said it “has decided that it is prudent to retain the available cash within the business at the present time and not pay a dividend.” To make matters worse, it had more than $66 million in cash on hand at December 31, down $50 million in a year. A 7.5 cents a share dividend would have absorbed just on $12 million. Prudent, perhaps, but so far as the market concerned, Salmat has blotted its copybook — it sold itself on being a consistent, dividend-paying yield stock. No longer. — Glenn Dyer

Watch Ten. Fresh from ruling off its 2014-15 first half on Saturday, struggling Ten Network shares went nowhere yesterday — remaining steady on 23 cents — despite the boom in the wider market. Shares of rival Seven West Media were up 9.1% yesterday (the best-performing stock in the ASX 200) to $1.615 (40 cents, or 33% above the all-time low hit just on two months ago). Nine Entertainment Co’s shares rose 2.4% to $2.10 yesterday and are also up strongly since they hit their all-time low of $1.62 six weeks ago. That’s a rise of nearly 30%. So Bolly all round at Nine and Seven. But at Ten? Well, the 23 cents a share Foxtel/Discovery bid price hasn’t been withdrawn, so presumably it’s still out there being talked about. Despite the clear rise in Ten’s audience figures and ad revenue share in recent months, the share price has gone nowhere, rising from 20.5 cents three weeks ago to 23 cents yesterday — around 10% (from a very small base). With Ten’s putative future dominant shareholder News Corp swopping on Sky News (“the start of bigger things” according to a TV insider), is there a deal in the offing for Ten at the low 23 cents a share price? — Glenn Dyer

Peter Fray

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