On the same day that Amazon’s new Marketplace started in Australia – threatening all retailers – one of the nation’s oldest retailers struggled to hold on to its management and board.
The Myer board survived, but it is damaged. Whether it is hurt terminally remains to be seen.
But today shareholders – many of whom were sceptical as I spoke to them as they entered the Myer annual meeting today – sent the strongest message to the board and management.
More than 25 percent of Myer shares voted against key resolutions at its annual general meeting.
It included the appointment of key directors, as well as its remuneration report for executives.
First Strike against Board
It is a so-called first strike against the board.
If a board suffers two consecutive strikes – on any matter – under company law all directors must immediately stand down and put themselves up for re-election.
In other words, shareholders have not voted out the current board, but they’re one step away from doing it.
The man agitating for change at Myer is one of Australia’s most experienced retailers, Solomon Lew, who now owns 10.8 percent of the shares.
Lew’s ownership comes through his own retail chain, Premier Retail, which owns among other things Just Jeans, Peter Alexander, Dotti and Smiggle.
But as a major producer of fashion, Premier is also a supplier to Myer.
The Myer board has made much of their relationship, saying it is a conflict of interest for Lew to be a major shareholder, controller and supplier to Myer.
Lew has shot back saying he has the same relationship with the electrical company Breville, whose share price has soared in recent years.
The outgoing Myer Chairman Paul McClintock told shareholders today if Lew wanted to control Myer, he should pay all investors a premium to take that control.
But the question all Myer shareholders have to ask themselves – given their share price has fallen from $4 on listing on the ASSX to 70c today – is whether a Lew-controlled business will get some of their money back more quickly than the strategies laid out by CEO Richard Umbers and his team.
Today, Umbers told shareholders that retail is not getting any easier.
He said that there would be no demonstrable change in performance in the second quarter of the year compared to the first quarter.
“It is going to remain tough,” he said.
Which is why Christmas, Amazon and the state of Australian households’ finances might just determine the fate of Myer’s board and management.
As Umbers told the meeting today: “November, December and January are the most critical in achieving results.
“Our efforts are just outside this room (the main Myer store in the Bourke St Mall, Melbourne). You can see them for yourselves.”
But the real problem is not in the main city stores, but in regional and rural areas, where the cost of living pressures are even more acute.
Already Myer has said three stores will close by 2020, but some suggest there could be question marks over at least 20 Myer stores.
The other problem here is that of existing lease contracts with major shopping centres, which would be expensive to walk away from.
The big question, for me right now, is whether the Myer board and management can not only deliver the right financial model for Myer, but whether they can deliver fun to shoppers and their stores.
If retail in the future is an experience, not a chore, then it has to be enjoyable, fun and a day out.
“We need to make shopping an experience again,” incoming Chairman Garry Hounsell said today.
AGMs are rarely be described as fun. This one didn’t have too many laughs. Actually, it didn’t have any laughs at all.
But in the meantime, you suspect Solomon Lew is having a great laugh.
This is sport – entertainment – for him. But visit one of his Smiggle stores. That attitude of fun is all around.
Let’s hope the mood of the AGM today is not an indication of the future of Myer’s stores. Very professional. But no hoopla. No fun.
Unless, and until, the Myer board and management can find the fun, I suspect they’re all doomed.
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Interviewed Eli Greenbatt, Senior Business Reporter, The Australian titled ” Myer shares plunge, as it downgrades profit .”