Investors have given yesterday’s senior management changes at Myer (MYR) a big thumbs down – not because they are opposed to the departure of long time CEO Bernie Brookes, but because they seem to think it means there are undisclosed problems at the retailer which will need clearing up.
Specifically it seems the biggest fears are about the retailer’s interim financial report and sales performance for the first half of 2014-15.
That is due out in around 10 days and for the senior management reshuffle to happen so close to that release means the board has a good idea of the company’s first half performance and the CEO’s (who has been frequently reported as about to depart) departure is a consequence of that performance.
Analysts point out that well-performing companies with good profits and sales reports to release do not have a reshuffle of senior management ahead of releasing those reports to the stockmarket.
It was that sort of thinking which saw Myer shares plunge more than 12% yesterday at one stage on the news, and remain down around record lows for most of the day.
They ended on $1.65, compared with the all time low of $1.615 reached during trading. The fall on the day was more than 10%.
MYR 2Y – More bad news to come from struggling Myer?
The recent earnings history of Myer supports the view of a weak interim result.
Analysts fear another weak result in 2015 and yesterday’s changes underline those fears.
Myer shares have gone the same way – the 2009 IPO price was $4.10 and yesterday it was trading around $1.62.
Mr Brookes, CEO for almost nine years, was due to retire last August, but stayed on to complete a merger with rival David Jones, which failed.
The Myer board added an extra surprise in yesterday’s announcement. Instead of naming the favourite, Dan Bracken, the former chief merchandise and marketing officer, the board named relative newbie, Richard Umbers, who’s only been at Myer since 2014 as chief information and supply chain officer.
Despite his techie sounding former role, Mr Umbers has experience in ecommerce and customer fulfilment at Woolworths and Australia Post.
A third change sees Chief Financial Officer Mark Ashby quitting to take up a role offshore.
To mollify Mr Bracken, the board has named him deputy CEO, which looks like a bit of an insurance policy in case Mr Umbers doesn’t make the cut.
Mr Umbers was hired by Myer last July. Myer said at the time that Mr Umbers would, in his new role, lead the technology that underpins the Myer One loyalty card program, which now has over five million users that represent 70% of the department store’s sales. At Australia Post he was general manager of ecommerce and parcel services (the growth area of Australia Post).
Before then he ran customer engagement programs at Woolworths and also held roles as managing director of Aldi in the North-West region of the UK and Ireland.
From that appointment it’s clear the Myer board wants to lift its game in ecommerce and online retailing through Mr Umbers experience.
Mr Bracken is there to backstop on the performance of the department stores, just in case anyone forgot Myer’s still dominant selling channel. And Mr Brookes is out the door in a couple of months time, after helping with the transition.
Mr Umbers will conduct a strategic review of Myer, which seems pretty dumb because its problems are well known – it can’t sell goods to its customers and it has difficulty attracting people to its stores.
It has spent heavily on new stores and store refurbishments in the past four years for minimal result in terms of sales growth and higher earnings.
Myer chairman Paul McClintock said on Monday, "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."
In other words, Myer has rediscovered the customer. Break out the champagne!
