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Solomon Lew turns the screws on Myer

For Myer this means a tight turnaround to get the stock unloaded, picked and onto the shelves in the lead up to Christmas. It will be an even tighter deadline to get merchandise ready for November’s Black Friday and Cyber Monday sale frenzies.

Fewer supplies and fewer items in stock will likely mean a hit to Myer’s sales over the critical trading period which will make it harder to service its $340 million in debt repayments, with $30 million due this financial year.

Some suppliers are so concerned about Myer’s future they are reining in supplies and requesting it pay up within seven days of delivery. There is talk that some suppliers are losing their appetite to take orders and deliver in four to five months due to the outlook for the beleaguered department store, particularly when suppliers are unable to obtain trade credit insurance and its lenders hold security over the company’s assets.

In response to a list of questions Myer said it was ramping up its stocks in preparation for Christmas “and do not envisage major issues with our planned stock for the upcoming Christmas period at this stage”.

It said the delays to the 200 containers was inaccurate but was monitoring the issues associated with the Sydney industrial action. “We have had, and will continue to have, a steady flow of stock arriving over the coming weeks to support what is typically the peak intake period for a retailer as we ramp up for Christmas – and we do not envisage any major issues for this upcoming Christmas period at this stage.”

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The retailer refused to comment on relationships with individual suppliers but said it was in constant discussion with them. “And as we have done throughout COVID-19, continue to pay our suppliers on time as per their agreed terms.”

Whatever the case, Myer is facing a few headaches, not the least its shareholder base.

Lew recently received a call from Myer’s second-largest shareholder Wilson Asset Management’s Geoff Wilson about the company. The fund manager’s solution was to send a letter to Myer which resulted in a culling of directors and cutting of director fees, something Lew doesn’t believe is anywhere near enough to fix the ailing retailer.

To this end Premier Investments, which holds 11 per cent of Myer, wrote to Myer requesting its share register to “consider writing to Myer’s members in relation to any resolutions proposed at Myer’s AGM.”

It will be a test of the appetite of the Myer shareholder base on whether it will vote to re-elect Hounsell, who is up for re-election at this year’s annual general meeting as well as lob a first strike against the company; something Lew has managed to do before.

Indeed the 2018 second strike against Myer was equally successful but pulling off a board spill motion was blocked by Anton Tagliaferro’s Investors Mutual, much to Lew’s and many other shareholders chagrin.

Interestingly Investors Mutual lost patience with Myer earlier this year and sold up.

To put it into perspective, since Myer listed on the ASX in November 2009 at $4.10 its shares have fallen 95 per cent, destroying billions of dollars in shareholder value as investors dumped stock following profit downgrades, scandals, new management, board refreshes and new strategies.

When Hounsell became chairman, Myer’s shares were 80¢, with a market capitalisation of more than $800 million compared with 20¢ a share, or market cap of $164 million, on Friday.

Solomon Lew is a fierce opponent of Myer's chairman Garry Hounsell.

Solomon Lew is a fierce opponent of Myer’s chairman Garry Hounsell.Credit:Eddie Jim

This time around all eyes will be on Wilson to see whether the fund manager sides with a company that has made an art form of disappointing or Lew, who hasn’t put a foot wrong when it comes to managing retail.

His Premier Investments has managed to lift net profit 30 per cent for the year, despite the COVID-19 pandemic. It is also shaping up as a promising Christmas for Premier, which owns brands such as Peter Alexander and Smiggle, as Lew didn’t cancel any summer supplies when the pandemic first hit.

He also took a bold stand against the shopping centre giants and refused to pay rent while his stores were shut, something that will have a profound impact on the power shift between shopping centres and retailers.

But Myer’s annual general meeting isn’t Lew’s end game.

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His next step will be an extraordinary general meeting, most likely to be called in early 2021, depending on the performance of Myer during the Christmas season, which is supposed to be the most profitable time for retailers.

If Myer’s Christmas is a disappointment, an EGM is all but inevitable, and with it calls for a board spill and an overhaul of management, specifically the chief executive John King, who Lew has previously described as presiding over a strategy that is in “tatters”.

Right now Christmas looks challenging for Myer. If more suppliers start reining in supplies and requesting it pays up within seven days of delivery or they lose their appetite to take orders and deliver in four to five months, things will start to unravel.

The upshot is if something isn’t done to fix the mess, time will run out and 10,000 people will lose their jobs, non-bank creditors and shareholders will lose everything.

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