End 2012
When Myer CEO Bernie Brookes announced a 15% fall in net profit for the financial year 2012, the reasons for the poor result given to the press and shareholders were insightful. They included the fall in equity markets, turmoil in Europe, the high Australian dollar, subdued consumer sentiment, the middle man, the internet, the carbon tax and the weather. An unseasonably warm autumn had affected sales of winter clothes stock.
There were so many uncontrollable factors that seemed to be causing the company’s profit demise.
At the same time though, with Britain in another technical recession, department store giants Debenhams and Marks and Spencer recorded profit increases, and while retail across Australia was sailing into strong headwinds, there were still some outstanding performances. Flight Centre, Lorna Jane, Kathmandu and JB Hi Fi to mention a few.
Our Spies Went In
With this in mind, our workforce spies first visited Myer a number of times in 2012. The first thing of impact was how nice the shops looked, the great 67 locations, the strong branding and the quality of products. Then we tried to buy some clothes, but finding a retail staffer was like playing a game of hide and seek. Men’s change rooms were often closed; they had to use the women’s rooms, (something distinctly off-putting to both sexes and certain to kill sales). Clothes were strewn around as staff shortages meant there was no time to clean up. Whilst Brooks continued to talk about the myriad of uncontrollable issues, someone seems to have forgotten that Myer is a retailer. And for retailers to stay ahead of other sales avenues, people want an experience and service. And that means great staff, in the right numbers.
Sep 2012
Months later however there were signs of change. Bernie was taking responsibility. He admitted in the press that bending to the investment industry and slashing staffing costs and numbers across their 67 stores was a mistake. Customer service and up-staffing was announced as now being back on the plate, (odd things to drop off when you are a high street retailer). By September 2012 things were stated to be looking better, an almost suspiciously fast turnaround.
More worrying to any investor’s confidence in this turnaround strategy, was when Brooks likened the factors affecting the retailer’s margins as a ‘washing machine’ in which there’s so much tumbling around it’s hard to see the real picture for the suds. Probably not the type of clear leadership we would seek from the chief.
May 2013.
By May, four quarters of growth were announced, but the Myer results were slowing again. There had been no real increase on sales in relation to square metre store area.
Seeing that 2013 wasn’t playing out as he had hoped, the CEO stated that growth continued to be uncertain. The flattening results were caused by ongoing consumer uncertainty, rent costs, decline in consumer sentiment prompted by negative reaction to the May budget and the upcoming September federal election. It was also rival Target’s fault for being terrible at creating stock overhangs, which meant they would start a discount war. This comparison was surprising because most people do not think of these two stores as rivals, their products and shoppers are so different. The $1,000 GST-free threshold on internet sales was also quoted as having an impact, even though this sales channel still only accounts for single-digit sales Australia –wide, and is not isolated to his retail business.
The other impact quoted was due to rising labour costs. Was he surprised that his previously announced up-staffing strategy generated this? What will happen when the $20m is spent from their stated goal to create 1 million extra staff hours? Will that create a flywheel effect whereby the finance gurus go back to staff cuts again?
And then of course came Bernie’s howler, when he stated that the new proposed Medicare levy for the National Disability Insurance Scheme could affect his group sales, which of course it must, because it seems everything else does. Fortunately, he didn’t mean that and clarified his intent soon after by stating that business remains sensitive to government imposts on the consumer, as it adds to the negative consumer sentiment and affects sales. This eloquent corporate statement comes from the same source that has called for the government to introduce GST onto online sales, an impost onto the same consumer.
September 2013
Myer is again rolling out the reasons for the poor 2013, with $3bn in sales flat since its float in 2009 and net profit down 8% even from the slack year of from 2012. But with the many of the 2012 reasons now defunct (Dollar too high, equity markets down, Europe meltdown etc), there is a new washing basket full of ‘uncontrollable’ issues. Higher wages, rents, taxes and utilities costs. The internet apparently is still a major cur. And May and June sales were affected, yet again, by an unseasonably warm winter, (caught twice in a row on that one). It’s almost as though other retailers like K-Mart, many powering on strongly, exist in a different retail universe.
So much for Good to Great business author Jim Collin’s adage of confronting the brutal facts. Myers seemed to be getting swamped by them.
Have they forgotten that they are a premium shopping experience, once known for their excellent service? If people want cheap discounted goods, they’ll buy on the net, be happy to be ignored at Aldi or left alone at Coles. If they go to a dollar store, it’s fine that the stock is on the floor. But when customer’s go to Myer, they expect more. And so if Myer want to continue or return to being relevant to consumers, they need lots of nice smiling sales staff to meet, greet and help their customers, keep the stores tidy and allow people to try on clothes in their own sex change rooms. And they need these staff to be employed full time, not as casuals or on contract, so they take ownership, pride and real passion in the company.
One makes you think that in this tumble dryer of problems, Myers has forgotten that they are a well loved retailer that could be a heartbeat away from getting their mojo back. And the answer is at their feet. Employ great retail staff in sufficient numbers.
Recent Myer press statements predict 2015 as a good year. So do many, in following the economic predictors, so if Myers continues do no nothing, they may just be right, rising like a stick with the tide but not seemingly in control of their destiny. Stay tuned. To date, they have left out natural disasters and terrorism.