The Distillery: Myered Down

Jotters debate whether Myer can adapt to the times, arguing that the department store model faces ongoing structural pressure.

Bernie Brookes is doing all he can to bring a clunking Myer into the modern age, but there's a sense among the commentariat that his task is simply too great. After yet another disappointing profit result, one jotter backs Brookes as leader of the best of a bad bunch, while others doubt his hoped-for return to growth in 2015.

John Durie, for one, says the facts don't yet match Brookes' "bullish" case. Myer's moves to boost house brands and online sales will pay off, the Australian columnist posits, but total sales are stagnant and costs are increasing.

He sums it up neatly: "Brookes is making all the right moves and paddling faster than a duck under water, but the tide is carrying him out to the ocean abyss at a faster rate."

Fairfax's Malcolm Maiden offers an equally evocative summation of Myers' attempt at modernisation:

"The question Myer's profit numbers raise again … is whether doing up department stores is the equivalent of changing the upholstery in a horse-drawn cart a century ago to meet the challenge posed by automobiles: there are new ways to shop, and Myer cannot easily respond."

At The Australian Financial Review, Matthew Stevens offers some gloomy context:

"Over the three years since Myer hit its post-IPO sweet spot in 2010, the company’s key numbers have been in consistent retreat. Through 2013, the department store made 26 per cent less net profit than it did in 2010 from sales that are 4 per cent lower than they were three years ago. That pattern looks unlikely to change through FY14."

While Brookes describes the current financial year as one of "transition", Business Spectator's Stephen Bartholomeusz argues it's unclear what the department store is transitioning towards — especially as offshore brands enter the Australian market and fragment available spending.

"In the long run, offshore experience suggests that the ‘’bricks and clicks’’ model now being pursued by all the major retailers will prevail and that they should end up as the dominant players online. However, the physical entry of brands like Zara and TopShop and others with differentiated models and offerings does complicate the outlook and creates pressure for continual innovation and investment in their own offers.

"The success and growth of Myer’s exclusive brands is a key to Brookes’ response to the threat. They are higher-margin, they aren’t available to online competitors and can be used to drive Myer’s own online sales towards Brookes’ target of $300 million a year — roughly the level generated by the group’s flagship Bourke Street store."

Despite the hardships, The Australian Financial Review's Chanticleer columnist, Michael Smith, throws his support behind Brookes for running one of the nation's "smartest retailers".

"Brookes is due to retire as chief executive next year. The board is in no hurry to show him the door and a search will get underway next year. Even though Myer’s shares are trading around 30 per cent lower than their 2009 listing price, Brookes has avoided the kind of declines some of his rivals are experiencing and his legacy as a good operator should remain intact."

The Australian's stock picker, Tim Boreham, also maintains his "hold" rating on the company.

"With the short-term tailwinds balancing the positives, we'll stick with that. Investors can enjoy a 6 per cent yield while they await the elusive rewards from Myer's makeover."

In the same newspaper, economic editor Adam Crieghton examines the Coalition's populist proposal to increase the burden on foreign investment in Australia. As he rightly notes: "Demanding that farmers receive lower prices for their assets is a bizarre policy platform for any political party that purports to represent country voters."

At The Australian Financial Review, meanwhile, Karen Maley revisits British Chancellor of the Exchequer George Osborne's famous declaration three months ago that the British economy was “out of intensive care”. "Now," Maley says, "a spate of positive economic reports has allowed him to upgrade his prognosis."

And finally, Fairfax's Michael Smith marks the five-year anniversary of the fall of Lehman Brothers with an examination of the small fortunes being amassed by liquidators as they unwind the global business.

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