THE DISTILLERY: Myer's slowing mojo

Jotters say Myer's hiccups aren't surprising given the economic environment, and one has good words for Bernie Brookes' operating strategy.

Myer boss Bernie Brookes unveiled a set of significantly lower comparable store sales to the previous quarter yesterday. Is it part of a terminal decline of the department store model, or a reflection of the situation in Canberra? The economy can’t be to blame for the poor consumer confidence numbers, can it?

The Herald Sun’s Terry McCrann says Brookes has at least proved his ability to milk the company’s position as a mid-market operator. However, The Australian’s Richard Gluyas explains how retailers were actually a little positive during the March quarter. No longer.

Fairfax’s Malcolm Maiden reports that Brookes remains concerned about consumer confidence, citing yesterday’s Westpac-Melbourne Institute index on the subject.

“It’s persuasive,” writes Maiden, pointing out that the number should be mighty fine about now given the relatively strong economic outlook, unemployment rate and equity market.

“Despite that the consumer sentiment index fell by 7 per cent from 104.9 to 97.6 in May. The index has been compiled monthly since January 1975, and a score of 100 indicates that optimists and pessimists are balanced. Its high was 123.9 in May 2007, at the apex of a boom that saw confidence mutate into hubris, laying the foundations for the crash that followed. Its low was 79 in July 2008, when the global crisis was two months short of a climax that almost brought the financial system undone. July 2008 was May 2007's polar opposite: a time of well-founded high anxiety.”

The Australian Financial Review’s Anne Hyland previews the meeting of global department store bosses in Istanbul, which Brookes will be attending. Interestingly the department store model has been under question since well before the internet became prevalent.

“Since the 1950s, various commentators have been calling the death of the department store and while their numbers have declined these cathedrals of materialism continue to defy extinction, even in tough retailing conditions. Those painful conditions were on display yesterday when Brookes unveiled Myer’s third-quarter sales, which showed modest growth, but disappointed investors…Brookes gets together annually with chief executives from other department stores around the globe where they exchange ideas on what they’re doing, from online offers to store refurbishments, as they seek to constantly evolve their models to compete with online retail and fast fashion retailers such as Zara and Topshop.”

Business Spectator’s Stephen Bartholomeusz doesn’t disagree with Maiden that those three crucial economic inputs would normally bring about a confident consumer, but there is another input.

“Retailers historically have blamed federal elections for weaker sales and while the formal campaign period has yet to start, the seemingly endless informal campaign that started when Julia Gillard announced the election date in January may also have had a dampening effect on confidence and spending. Myer’s total sales were also impacted by the refurbishment of three of its larger stores in New South Wales, Queensland and South Australia and, while Brookes dismissed its influence, by the recently revealed inventory issues that led to last week’s downgrading of Target’s earnings for this year.”

The Australian Financial Review’s Jennifer Hewett picks up on comments from Westpac economist Bill Evans that the fall in the Australian dollar, while beneficial for exporters if sustained, has probably reminded many consumers that there is dwindling confidence in the economy.

In other news, The Australian Financial Review’s Matthew Stevens is glad to hear a “remarkably colourful denunciation” of the anti-coal movement by recently installed Australian Coal Association boss Dr Nikki Williams.

Fairfax’s Elizabeth Knight equates the task of discovering whether Kohlberg Kravis Roberts made a profit in its seven-year investment in Seven West Media assets to “the dark arts of business”.

Still in media, The Australian’s Darren Davidson believes that Bruce Gordon could be a kingmaker of sorts when the endgame between the metropolitan free-to-air broadcasters and their regional affiliates arrives, whether it's mergers or new partnerships.

Elsewhere, The Australian’s Criterion columnist Tim Boreham believes there’s no guarantee that RHG’s board will accept the proposal put forward by subprime lender Resimac. But the old Rams Home Loan’s future as a stand-alone player is finished.

The Australian’s Andrew White says private equity firms might cop a lot of flack, but they’re good at picking the right time to offload an asset.

In resources news, to underline just how hard the mining services players have been hit as the boom comes to an end, The Australian’s John Durie points out that the 35 per cent retreat in value is equivalent to about $17 billion and, more astoundingly, is "arguably the biggest single sectoral destruction of value since the dotcom crash early last decade”.

The Australian’s Asia-Pacific editor Rowan Callick points out that the potential for a Japanese revival is the biggest story for Asia at the moment and, by extension, for Australia.

Why aren’t we more excited about this idea?

Finally, the offering from The Australian’s economics editor David Uren this morning can be pretty neatly summed up by the headline: "If [Treasury Secretary Martin] Parkinson is wrong on China, the budget is wrong on everything".

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