Billionaire Solomon Lew warned on Sunday that the board of Myer was failing and the drop in first-quarter sales signalled an alarming trend which not even Father Christmas could stop.
Mr Lew, the chairman of Premier Investments, which holds a 10.8 per cent stake in Myer, said the department store chain was now in a parlous state as he stepped up his calls for the Myer board led by chairman Garry Hounsell to be dumped.
“The trend is not Mr Hounsell’s friend,” Mr Lew said.
“A sales drop of 4.8 per cent (nearly one in every $20 of sales disappearing) is something that even Father Christmas can’t turn around,” he said.
“Myer’s admission that its online sales growth has flatlined is also of major concern as this should be an automatic area of growth in line with every other retailer”.
Mr Lew and Premier is trying to oust the board at the November 30 annual meeting and wants other Myer shareholders to vote with him against the remuneration report, to bring on a second strike in consecutive years which triggers a spill of the board under Australia’s corporate regulations.
“The failed Myer board must go,” Mr Lew said. He also pointed out that Myer’s net debt position had only moved by about $1 million from Myer’s published position at the end of July, despite the company having cancelled its dividend payments and that would make the banking syndicate nervous.
He said the numbers don’t lie, no matter how hard the Myer board “tried to hide them”. He said Mr Hounsell last year had said similar things about the importance of the months leading up to Christmas to Myer’s overall performance only to downgrade Myer’s profit guidance during December, 2017 and then the following February because of a “terrible” Christmas performance last year.
Myer revealed late on Friday that sales for the first quarter of 2018-19 had plunged by 4.8 per cent as it belatedly responded after a day of high drama when its shares were forced into a trading halt by the ASX.
Myer said in that statement to the ASX that comparable store sales were 4.3 per cent below the same quarter last year, confirming that the downward momentum which has alarmed investors was a reality, although it reiterated that new chief executive John King’s strategy was not to chase unprofitable sales.
The company said an Australian Financial Review article which had prompted a trading halt contained “unlawfully leaked, draft and incomplete financial information taken from an unapproved internal document relating to part of the Myer business”.
Myer also said that total online sales grew by 3.6 per cent during the first quarter. Myer, which has a July year end, has previously released first-quarter sales at its annual meeting. However, it said in May it would no longer provide quarterly sales updates, mirroring Wesfarmers’ move away from quarterly reporting.
It came as veteran fund manager Geoff Wilson took a potshot at Mr Lew at a Melbourne investment conference on Friday amid simmering tensions between the two. Both have a lot at stake as Myer grapples to find any traction as the department store business model looks increasingly challenged around the world.
Myer chairman Mr Hounsell tried to reassure investors in the late statement on Friday. “Myer has solid cash flows and has reduced net debt by $7 million compared to the previous corresponding quarter,” Mr Hounsell said.
“Myer is well aware of its continuous disclosure obligations and confirms it is compliance with them”. Myer said that a bottomline loss for the first quarter was an improvement on the same time a year earlier when one-off costs were stripped out. It didn’t specify the size of the loss. It also said that trading during the second quarter represented the most important contribution to Myer’s full-year profitability.
Shares in Myer were forced into a trading halt by the ASX’s compliance unit on Friday in the wake of a report in The Australian Financial Review’s Rear Window column that sales had fallen significantly in the first quarter of financial year 2019.
Myer shares were issued at $4.10 in a public float of the business in 2009 and are now trading at almost one tenth that level despite several attempts at a resurrection, the latest by new chief executive Mr King who took the helm in June.
Mr Lew’s stake in Myer has more than halved in value since he acquired it in early 2017. He has been arguing for months that the company has lost its way, and has waged a public campaign to discredit the board.
Mr Wilson’s Wilson Asset Management funds hold a combined 5.5 per cent of Myer after building a stake since early July at low prices.
The ASX compliance unit was annoyed at a vague statement released by Myer earlier on Friday to the ASX, which didn’t address the specific information in the article. Rear Window reported that Myer’s group sales for the three months ended October 31 had fallen 5.5 per cent year-on-year, while online sales rose 41 per cent against the same period two years ago, yet were down 5.2 per cent on the previous corresponding period.
It is understood there was a series of phone calls between the ASX and Myer over the issue, with the ASX deeming the Myer response inadequate and leaving investors uninformed and in an information vacuum. The ASX insisted that Myer go into a temporary trading halt pending more specific information being released.