“Myer is in Peril,” Solomon Lew Says

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By Published On: May 18, 20180 Comments

In his latest attack against the Myer board, Solomon Lew, the chairman of Premier Investments has written a scathing letter to shareholders warning them of the likelihood of a fourth profit downgrade in under a year.

It seems Lew was less than impressed by the latest quarterly results that were released by Myer on Wednesday, where the department store’s Executive Chairman, Garry Hounsell, announced that sales for the financial year-to-date were down 3.4 percent.

“It is with continued disappointment that I write to you again about the dismal state of the company we jointly own, Myer Holdings Limited (Myer),” Lew wrote in the opening to his letter to Myer’s shareholders.

According to Lew, the embattled retailer’s “aggressive” approach to sales over the last 12-months isn’t working, and despite ousting former CEO, Richard Umbers earlier this year, the company’s performance continues to disappoint.

“Myer has been selling dollar notes for fifty cents each, and they still can’t improve their sales. We shareholders will pay the price for this incompetence we have already lost our dividends, and we will also soon be paying higher interest charges and increased bank fees on Myer’s debt.”

On Wednesday, Hounsell, like many other retailers, attributed poor performance over the past few months to the unseasonably warm weather, which has greatly impacted the sales of winter homewares, appliances and apparel. However, Lew thinks this is a joke, “Too warm? He must not have been outside for weeks?” he argued.

In April, the Bureau of Meteorology (BOM) said that April 9 was the warmest day ever recorded for the month, with Felicity Gamble, a BOM meteorologist saying, “autumn in the south felt more like summer.” Maximum temperatures in April across southeastern Western Australia, South Australia, western NSW and western Victoria were 12 degrees higher than usual, with most of the country reportedly experiencing temperatures eight degrees above the national average for this time of year – a fact Lew seems to have overlooked in his latest outburst against Myer’s board.

“We should all brace ourselves for yet another profit downgrade from Myer in coming months (the fourth downgrade over the past year!), as well as for a massive loss to be announced in September. We may never see a dividend again from Myer unless the current Board goes,” Lew wrote.

Before claiming that “Myer is in peril”, Lew let loose against Hounsell, calling for him to “at least have the decency to renounce his $83,000 per month payment”.

This letter comes after the AFR reported that Myer is coming very close to breaching its debt covenant and shareholder equity covenant if same-store sales keep falling by three percent and gross margins continue to shrink.

Myer has been in talks with the banking syndicate to renegotiate these covenants, but if the current ones remain, Myer’s new CEO, John King will have to work through some serious restraints when he officially commences his role with the company on June 4.

According to Lew, King has already been set up to fail, as he will be “saddled” with an “incompetent” board of professionals who, he believes,  don’t understand retail.

“We [Premier Investments] believe that history will judge very harshly those who stood by and allowed Myer to fail, which is what will surely happen under the current Board,” Lew closed his letter to shareholders with.

Myer also announced on Wednesday that as of 2019, the company will no longer be providing quarterly reviews, which could cause further concern for already ‘worried’ investors, like Lew.

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