Myer boss Richard Umbers remains committed to his “wanted brands” strategy despite the retailer suffering a $46 million hit from the collapse of its Topshop experiment and continuing pain from fashion label sass & bide.
Less than two years after announcing Topshop as part of the ‘New Myer’ five-year turnaround strategy, Myer has closed all 17 of its concession stores and will write down its $6.8 million stake in the brand.
Myer bought a 20 per cent stake in Austradia, the Australian franchisee for the Topshop Topman, to ensure it was the only department store chain to have the label.
Myer on Thursday announced it will take a total $45.6 million hit comprising a $6.8 million writedown on Topshop and a $38.8 million impairment of the value of its struggling sass & bide brand.
“Topshop was a key brand and one of the first ones we took on,” Mr Umbers told AAP on Thursday.
“It is now part of a natural cycle of renewal, which in this particular case was prompted by the unfortunate circumstances of Australia.”
Myer had previously flagged full-year net profit above 2016’s $60.5 million.
However writedowns and another $20 million in costs are now likely to eat up a significant portion of the $66 million to $70 million underlying full-year net profit it now forecasts.
Mr Umbers said fierce price cuts across the apparel sector, weak consumer spending due to low wages growth and heavily indebted households have created tough trading conditions.
“And there’s some anticipation of more tough times ahead with interest rates possibly going up and housing prices not increasing the way they have in the past; all of that contributes to reduced spend,” he said.
Despite Topshop’s collapse and the resignation of deputy CEO Daniel Bracken, who was one of New Myer’s architects, Mr Umbers said Myer will stick to its turnaround plan, including chasing wanted brands and continuing sass & bide.
Topshop did deliver benefits in that it opened Myer up to a raft of new brands, including most recently Forever New, he said.
Shares in the retailer closed at an all-time low of 73.5 cents – down 9.8 per cent for the day and far from Myer’s 2009 issue price of $4.10.
Almost $600 million has been wiped from Myer’s market value since August last year in a decline which could see it become a takeover target.
Solomon Lew’s retail group Premier Investments bought a 10.8 per cent stake in Myer in March and released a statement calling it “a strategic investment,” which fuelled speculation that the retail magnate was gearing up for a takeover.
Comment has been sought from Mr Lew, a former chairman of Coles Myer, who is now chairman Premier, which owns Smiggle stationery stores, Peter Alexander pyjama stores and the Just Group.
Citi retail analyst Craig Woolford said department stores generate about 17 per cent of their revenue in the June-July sales period and blamed Myer’s shift away from discounting for hurting its second-half earnings.