Struggling department store group Myer (MYR) is going to make yet another attempt to maintain its relevance to Australian shoppers, spending $600 million over the next four years in store revamps and other changes, plus downsizing stores and staff numbers.
The plans, announced in the long awaited new strategy from the retailer yesterday, came with the news of a weak profit report and the announcement of a $221 million entitlement capital raising to help fund the revamp and cut debt.
That will be done at just 94 cents a share, 22% down on the close on Monday of $1.21, and a long way from the float price in late 2009 of $4.10 a share.
Myer says it will spend $450 million on its revamp, and has estimated costs (retrenchments and other restructuring costs at $150 million) over the next four years.
All in all the it is last desperate throw from a retailer that has spent more than two decades losing its way, especially under private equity ownership and then with the same management team in charge when it floated in one of worst ever floats at $4.10 a share almost six years ago.
MYR 1Y – Last roll of the dice for Myer?
The aim of the revamp is to double annual sales growth to 3% or more (and to raise total sales 20% over the next four to five years).
Myer also reported a 21.3% drop in underlying net profit to $77.5 million for the 12 months ending July and withheld its final dividend.
Myer also booked one-off costs of $61.7 million in 2014-15 relating to the strategic review.
Total sales rose 1.7% to $3.195 billion, with same-store sales rising 1.1%, and second half sales up 1.9%, and 1.3% on a same-store basis.
The $221 million two for five accelerated rights issue at 94 cents a share, will be fully underwritten, a sign the retailer isn’t confident of convincing shareholders, especially the smaller holders, to support the issue.
Trading in Myer shares was suspended yesterday to allow the first part of the issue to happen.
Myer has already revealed parts of its revamp – it has said it is dumping 100 brands to make way for new ones, one of which will be UK group, Topshop.
Myer said yesterday that it was taking a 25% equity stake in the UK fashion brand’s Australian franchisee, Austradia.
The Topshop and Topman brands will appear in Myer stores from November.
"The New Myer strategy sets out a defined pathway to return the business to sustainable profit growth," said chief executive Richard Umbers, who took on the role when Bernie Brookes stepped down in March.
"We will achieve this by delivering a sharper and more focused retail offer that attracts more of the customers who represent the highest value to our business.
“This will be supported by investment in our stores to make them more engaging and productive,” Mr Umbers added.
