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'We are only just getting started': Myer finishes round one amid retail upheaval

It was a week of waiting, waiting, waiting for Australia's $300 billion retail sector to see who would show up.

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Myer slashes growth targets

Myer has slashed growth and profit targets, blaming deteriorating economic conditions. But former chairman Solomon Lew says the board and management are actually to blame.

And would billionaire rag trader Solomon Lew arrive in person at Myer's annual general meeting, billed to be one of the season's most explosive, to grill the department store's under-seige board? 

Ultimately neither happened. But their presence in the shadows nonetheless rippled across the industry, as it faces one of the most tumultuous periods in recent history. 

On the top floor of Myer's flagship store in Melbourne's Bourke Street Mall on Friday, Premier Investments' chairman didn't show, instead sending Jeremy Leibler and Jeremy Lanzer from law firm Arnold Bloch Leibler on his behalf, armed with proxy votes from about 5000 retail investors who had joined the insurrection against the Myer board. 

By the end of the meeting, both Lew and Myer's newly minted chairman, Garry Hounsell, were claiming victory. 


Premier, Myer's largest shareholder with 10.8 per cent of the stock, had called on shareholders to vote against all resolutions to protest the company's dire performance and languishing share price. 

Premier – a listed company 37 per cent controlled by Lew – paid about $101 million for its stake in Myer in March and has lost almost $40 million on that investment as Myer's share price plummeted off the back of earnings downgrades and falling sales and profits. It wants seats on the board, but has been rejected. 

Almost 19 per cent of Lew's fellow shareholders joined the revolt, leading to a 29.41 per cent vote against Myer directors' pay packets. 

That passed the 25 per cent "no" vote threshold required to secure a "first strike" against Myer's remuneration report - a symbolic victory for Lew that sets the scene for a board spill upon a second strike at next year's AGM.

Myer's three appointees to its board - Hounsell, Julie Ann Morrison and JoAnne Stephenson were elected, despite votes against them of around 30 per cent. 

But Myer failed to secure the 75 per cent of votes required to pass two changes to the company's constitution, relating to proportional takeover provisions and permitting hybrid AGMs, in which shareholders could take part in future meetings online.

This is just round one. We are only just getting started.

Solomon Lew

Speaking on a phone conference after the meeting, Lew said the size of the protest votes showed that shareholders had lost faith in Myer's directors, and that his already months-long and acrimonious campaign against the board had some time to run.  

"This is just round one," he said. "We are only just getting started."

But Hounsell, who took over as chairman from Paul McClintock on Friday, said management and the board had been vindicated by the meeting, and now had a mandate to continue to pursue the "New Myer" turnaround strategy.  

"The voting down of the rem report has nothing to do with the remuneration of the company, it has nothing to do with any of the individuals on the board," the former Spotless chairman said. 

"It was the result of our largest shareholder voting against everything."

As for the 19 per cent of protest votes not coming from the Premier holding, Hounsell said those shareholders could not be considered "completely independent of the proxy gathering process that Premier has been through", but added he would work hard to win those investors' support.

The dispute with Premier was damaging Myer, Hounsell said, as some customers believed Lew's criticism of Myer's products and service and so shopped elsewhere. 

Premier - which owns the Just Group, Smiggle, Peter Alexander and several other chains - is holding on to the trump card of calling an extraordinary general meeting, where it is expected it would call for a full clear-out of the board.

Lew also took aim at Myer's second-largest shareholder, Investors Mutual, which holds 9.8 per cent of Myer's shares. Without its support, Hounsell might not have been elected and that meant IML's founder, Anton Tagliaferro, was now "part of Myer's dismal performance and any disappointments that come in the future".

"I'm sure his investors and super funds would not be happy," Lew said.

As this drama was building around the doyen of Australian retail, other retailers were wearing out their computer mouses hitting refresh on what for now must be Australia's most underwhelming website: 

Amazon has refused to say exactly when it will start trading locally but speculation went into overdrive this week when the American e-commerce giant emailed third-party sellers to tell them to be ready to receive orders as part of a trial with a "small number of customers". 

This seemingly confirmed predictions by retail analysts the Amazon would open here before "Black Friday", the busiest day on the US shopping calendar. But as of late Friday, Amazon Australia was selling only Kindles and e-books, as it has done for years, and Citi's retail analysts said they now expected a launch next week. 

Whenever the $US549 billion ($725 billion) giant opens here, Woolworths made it clear at its annual general meeting on Thursday that it wouldn't be waiting around for it to encroach on the grocery market, as it has done in the US through its Amazon Fresh service and recent purchase of the up-market Whole Foods chain.   

Australia's largest supermarket would open four new "dark stores" used to pack and ship online orders by the end of 2018, chairman Gordon Cairns said.

Woolworths said it was also pumping resources into its analytics and loyalty programs to target offers individually tailored to each of its customers - something Amazon has excelled at. 

And Cairns offered a word of advice to suppliers who were considering selling goods to Amazon: that they risked losing control of their branding and prices, which could have disastrous consequences. 

"Amazon cuts the prices substantially," he said. "That forces other retailers ... to reflect on whether they should be stocking the brand if they can't do it and make money. They can end up cutting their own throat."

Meanwhile, mid-market apparel group Specialty Fashion showed the brutal reality of what happens with things go wrong amid poor consumer sentiment and a rapid shift in trade to online players and international entrants.  

The company behind the Rivers, Millers, Katies, Autograph, Crossroads and City Chic chains said it would shut 300 of its 1000 or so stores after running up several years of heavy losses ($8.8 million in 2017, $2.1 million in 2016 and $4.4 million in 2015) and facing the wrath of shareholders at its AGM this week.