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Growing Concerns Over Myer’s New CEO

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By Published On: April 27, 20180 Comments

When it was announced on Tuesday that John King would be taking the reigns as Myer’s new chief executive, investors described him as a “safe pair of hands”, however, questions are emerging over how sustainable his work at House of Fraser really was.

In the days since Myer announced the appointment of its new CEO, analysts and investors have been keen to find out what King’s strategy for the embattled department store will be. In a hunt for clues, his achievements at House of Fraser have gone under review.

King left the British department store three years ago, and in the time since his departure, the chain of high-profile stores have fallen back into a similar position to what Myer is currently facing – rising debts and declining sales. This loss in profitability for House of Fraser since King walked away from the retailer is rumoured to have created unease among investors, as concerns about his ability to successfully reverse a 20-year slump in sales arises.

In fact, one shareholder, who wishes to remain anonymous, has reportedly told the Australian Financial Review (AFR) that King is “untried and untested”, and is suspicious as to why King held a relatively low-profile in the three years since stepping down from his role at House of Fraser.

The Fall of House of Fraser

Announcing his appointment as Myer’s new CEO, Myer’s Chairman, Garry Hounsell praised King’s “successful transformation” of House of Fraser.

“Over the course of his tenure at the House of Fraser, John and his team consistently grew revenues, differentiated the product offering and launched a successful online business, improved EBITDA and reduced the company’s debt,” Hounsell said.

However, despite King successfully raising profits to a record £460.2 million in his last year as CEO, this momentum was short-lived as sales started to plunge after his departure from the business.

After another year of poor Christmas trading results, House of Fraser has reportedly sought rent reductions from landlords and recently confirmed plans to reduce the size of its stores by as much as one-third. Restructuring has also been on the table, as the retailer appointed KPMG to discuss its options, last week.

An analysis of House of Fraser’s public accounts by The AFR has also raised concerning questions, as despite an improvement in top-line sales in the period between 2005-06, the company’s pre-tax profits of £27.3 million in 2005-06 plunged to a loss of £8.9 million in 2013-14 and a further £3.7 million drop in 2014-15.

The short-term growth of House of Fraser has left some shareholders and analysts concerned that King won’t be able to execute a long-term growth strategy for Myer, as his accomplishments in the UK all seem to be relatively short-lived.

Mixed Responses to King’s Appointment As Myer’s New CEO

Myer’s second-largest shareholder, Anton Tagliaferro, is optimistic about the retail giant’s choice of CEO, as he believes King has the retail and department store experience necessary to take Myer into the future.

Credit Suisse Analyst, Grant Saligari and his colleagues in the UK also believe King “did a reasonable job in a difficult environment in the UK”.

However, one anonymous shareholder remains adamant that King isn’t suitable for the role, insiders say. We’re also yet to hear an official comment from Solomon Lew, who is perhaps Myer’s biggest cynics given how vocal he has been in his desire to overthrow Myer’s board.

Regardless of his history, analysts claim King has a big job ahead of him, as Myer’s troubled balance sheets will likely hamper his efforts to set the retailer on a forward-moving trajectory, especially if sales continue to decline.

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