One jotter says Myer's 'ambitious' goal is actually very achievable, while another lambasts BHP's marketing message.

Australia’s retail market is in the toilet and thus any signs of confidence amongst senior executives will be met first with scepticism. However, Fairfax’s Ian McIlwraith explains this morning how Myer chief executive Bernie Brookes could be within his right to claim that the company’s full-year profit guidance is still achievable despite a disappointing first half, while The Sydney Morning Herald’s Elizabeth Knight investigates how Brookes has used acquisitions to strength exclusivity and pricing. Also featuring in this morning’s edition of Distillery, The Australian’s John Durie argues that it’s time for BHP Billiton boss Marius Kloppers to start really selling the miner’s message, while The Age’s Michael West says a free-lunch at Computershare could be about to come to an end.

But starting with Myer, Fairfax’s Insider columnist Ian McIlwraith offers an alternative interpretation of what analysts describe as an ambitious claim by Myer boss Bernie Brookes that a full year profit outlook of ‘just’ 10 per cent is still doable.

"Brookes' team reckon that sales in recent times have been holding to only 0.4 per cent slippage, and are working on the theory that the last quarter of this financial year will be a kind of reverse of what happened a couple of years back in the 12 months after the federal government's great flat-screen TV bonus. Back then, retailers got a huge boost during the financial crisis, only to find that sales spike was unrepeatable the following year, making their sales performance look miserable. By Insider's reckoning Myer needs to earn close to $60 million in this second half off probably $1.4 billion of sales – which would be a margin of 4.3 per cent. Its reported margin yesterday was 5.1 per cent, admittedly well down on the comparable 6.1 per cent of the first half of 2011, but Insider thinks that assuming things do not get decidedly worse generally – then Myer ought to be able to achieve at least that 4.3 per cent.”

The Sydney Morning Herald’s Elizabeth Knight explains how Myer is buying up clothing manufacturers to lock down brand exclusivity, lower costs and increase pricing power.

"The rationale for these acquisitions (other than the knocked down prices) is that they are exclusive to Myer stores. Myer also gets the advantage of controlling the manufacturing of the product from start to finish – thereby knocking out the middleman who traditionally clips the ticket for a 30 per cent take. The exclusivity also gives Myer a bit more pricing power and the ability to extend, say an apparel brand, into other areas such as cosmetics and accessories. The concept of ‘the house of brands’ was captured in Australia by David Jones. Myer has merely taken the idea and extended it by buying some of the brands.”

The Australian’s John Durie says BHP Billiton shares have underperformed the benchmark index and rival Rio Tinto over the last year due to increasing scepticism towards the company’s foray into US shale gas and the China growth story. BHP management has given them little reason to reserve such scepticism.

"Here is a clear need for management to get out and about. Kloppers is charming and highly personable but his outside forays are restricted and, given the uncertainty, there is a real need for him to get out to sell the story. BHP and indeed other Australian companies would do well to adopt the US strategy of being maximum-bullish on their own story, even if what the government and others are doing stinks. The message is slowly sinking in that the easy part of the commodities boom may be behind us – not that it is ending, but the growth rates are slowing. The more people question the future, the less likely they are to back the BHP story, and that's where Kloppers et al should start selling and start explaining.”

The Age’s Michael West says Computershare has been sitting on a nice little earner by holding on to funds from floats and what have you for as long as possible and collecting the interest in the process.

"Unfortunately for Computershare, though perhaps fortuitously for retail investors, the grocery juggernaut Woolworths may have called time on this ‘margin income’ ploy. Woolworths apparently told Computershare when negotiating its recent bond issue that the interest on investor funds should be remitted to investors themselves. And although the Computershare chief executive Stuart Crosby depicted the Woolies negotiation as a ‘one-off’ at the half-year analyst briefing, BusinessDay hears that ANZ insisted on the same deal for its latest note issue."

Sticking with company news for the rest of this morning’s business commentaries, The Australian’s Bryan Frith finds a decisive shift of power towards the non-associated shareholders of Aston Resources in the merger proposal with Whitehaven Coal, while his colleague Tim Boreham looks at Mariner Corp, Silver Chef and Myer in his Criterion column. The same newspaper’s Richard Gluyas says Nine Entertainment has seen its debt refinancing task complicated a bit more thanks to the latest set of advertising projections.

Turning to economic affairs, The Sydney Morning Herald’s Malcolm Maiden takes a look at Victoria’s budget, while The Age’s Tim Colebatch wonders why it wasn’t worse. The Sydney Morning Herald’s Ross Gittins and Jessica Irvine have been arguing that economic data is a poor way of measuring a nation’s sense of wellbeing, something that’s implied when governments refer to a people’s prosperity. British Prime Minister David Cameron has shared these beliefs for years and Irvine covers the results of his first attempt to rectify the situation.

The Sydney Morning Herald’s Michael Pascoe expands on themes raised by The Australian’s Judith Sloan in yesterday’s Distillery, by pointing out that the Greens’ understanding of what constitutes a small business and a big business is warped.

The Age’s Asian affairs reporter Peter Cai has been covering the many prescriptions for the Chinese economy and his latest piece features that of Jian Jianqing, chief executive of Industrial and Commercial Bank of China, the country’s largest bank.

And finally, Giles Parkinson writes in The Australian that the wind energy industry believes it can be cost competitive with existing forms of power generation and claims to the contrary only eggs them on.


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