I wrote a blog on 1 October 2009 questioning Myer's myopic retailing & customer service strategy in order to magnify the improvement in Myer's bottomline at the time of Myer IPO. I suggested that their flagship CBD stores aside, Bernie Brookes and his team were simply flogging off a bunch of tired old suburban stores with tired merchandising, poor appearance & skeletal staff offering absolutely minimal service. (You may wish to scroll down & read the my post)
Unfortunately for Mr Brookes & Myer, it seems that so far the markets and Myer customers tend to agree with my (and I am sure many others) sentiments. Myer shares have been trading for a mere 4 months. The share price is frequently setting all time low records & is trading at a significant discount (nearly 25%) to the issue price.
However, Myer's announcement to the ASX this week blaming tough discounting for less than impressive Christmas results is what makes me even more sceptical than I was in October last year!
Firstly, Myer were the main culprits responsible for starting the Christmas discounting war in mid October 2009. They slashed their prices so deeply that it left all other major competitors no choice but to do the same. Therefore, for Myer to blame the deep discounting for their poor results is laughable.
Secondly, perhaps Mr Brookes & his Board should employee Operation Managers who have the insight to remind the Board that in order to volume sell products in certain deeply discounted departments, face to face customer service is a necessity! And this involves adequate & preferably trained, and if it is not too much to ask, motivated staff! Most of the staff in Myer are demoralised, under trained & over worked!
For example, there is no wonder why the latest Myer announcement to the ASX admits disappointing "Electrical sales" but blames the poor results on the most obvious factors: lack of Government stimulus money & deep discounting!
Customers in a typical Myer electronics section in most suburban stores during December & post Christmas sales had to choose from 100s of discounted TV screens, DVD players, Cameras etc, plus the locked up & inaccessible iPods without having the luxury of asking a staff member for advice or assistance! Therefore, in all probability many of them simply didn't stick around! They walked out & got a similar or better offer & possibly some service elsewhere!
This makes me wonder how the Shoes Department fared in Myer's results.! My own personal experience at Myer in the post Christmas shoe sale was one of frustration! Alongside with at least 20 other customers, I got tired of waiting for the one stressed staff member on duty in the entire shoe department to attend to my request for the shoe for my other foot!
And I wonder the same about bedding, furniture, white goods.........
Nevertheless, in the announcement Bernie Brookes, Chief Executive of Myer, said:
“Against a backdrop of unprecedented early and deep discounting in the retail sector in the run up to Christmas, we now expect to achieve growth in EBIT in excess of 10% for the first half, and a continuing improvement in EBIT to sales margin. This reflects a continued disciplined approach to running the business – an ongoing focus on cost control, and rigorous inventory management."
He also stated: “While sales in the December month were disappointing, the business performed very strongly in January and the Stocktake sale was a great success."
It will be very interesting to see if Mr Brookes is accurate about Myer's performance in January!
At the end of the day, markets only care about financial results. But in case of Myer, this hell bent attempt at cost cutting seems to be a transparent attempt to artificially inflate EBIT!
And so far, neither the markets nor Myer customers seem to be taking much notice of Mr Brookes improved EBIT!
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