The email that turned Solly Lew against Myer

By | octubre 4, 2017
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On Sunday, September 24, Solomon Lew and his team had completed the preparations for the profit announcement of his stock exchange-listed Premier Investments.

Myer closing more stores after weak results

Department store Myer’s net profit has tumbled 80 per cent in 2017.

It was to be a standard announcement highlighting the turbo-charged expansion of its star brands Smiggle and Peter Alexander. The plan had been that the highly anticipated questions from investors and media on Lew’s 10.8 per cent investment in Myer would be «deadbatted».

But well-sourced information reveals that on that Sunday evening Lew amended the script when an email popped into his inbox from Myer’s chairman Paul McClintock. At that point, his patience appears to have run out.

The billionaire retailer, who had been seeking a meeting with the Myer board since May and been told the first opportunity for an audience was November, was now told by McClintock he could have half an hour before the October board meeting and this would require McClintock catching an earlier flight.

For the man who had invested about $100 million in Myer in March and watched 30 per cent of it disappear (on paper at least) being grudgingly granted a sliver of the board’s time was apparently the final straw.

While it is now clear that Lew, having sought from Myer a list of its shareholders, is waging a war with the department store chain, Premier will not be nominating any of his representatives for a board seat at this year’s November 24 annual meeting.

Under the Myer constitution, board nominations need to be made 45 business days before the meeting is held. The deadline has now passed.

This does not prevent Lew using his stake to vote against the re-election of the chairman.

Board games

But Premier may not even need to move on McClintock. There is mounting speculation that over the next three weeks McClintock will announce his intention not to seek re-election in November despite the fact Myer recently announced he would be staying another year.

Such an outcome would catapult new director Garry Hounsell to the chair prematurely. Lew has long stated publicly that Myer needs more retailers on the board but noted that Hounsell doesn’t have these qualifications.

Premier could seek support from fellow shareholders to vote against the election of Hounsell – but without the means to furnish a replacement there may be little point. Fellow director Anne Brennan has already announced she will leave this year and there has been speculation Chris Froggatt, who has been on the board since 2010, is also considering her position.

Lew and McClintock have exchanged many emails since Lew took his stake – in which Lew outlined his concerns about Myer.

One June email, which found its way to the media on Monday and was forwarded to Myer chief executive Richard Umbers, contained photos of dishevelled racks of clothing inside Myer-created «sale» floors.

Umbers responded to Lew in an email suggesting they could have a discussion about the photos and raised the idea of the pair exploring ideas and opportunities with Premier or Lew’s private company Century Plaza – both of which are suppliers to Myer.

More than three months have passed and no meeting has yet taken place. But it is noteworthy that most of Lew’s criticism has not been focused on Umbers.

Over to Umbers

In other emails to McClintock, Lew was apparently scathing of the board’s trip every two years to Dubai – while in another, Lew is said to have questioned why, in the all important lead up to Christmas, Umbers will be going to London for an October 12 private reception organised by Alexander Downer, the High Commissioner for Australia in Britain, to be a guest speaker on trends, opportunities and changes in the competitive landscape.

At the now infamous investor and media briefings on September 25, Lew blew his top.

He told the industry, investors and customers what he really thought of Myer’s strategy. It was, he said, a basket case – a retailer that was selling some product that even the Salvation Army would be embarrassed to have on its shelves.

But taking a grenade to Myer’s strategy or its execution wasn’t enough. Lew needed to explain to his Premier Investments’ shareholders how his own decision to buy into Myer appeared to have backfired.

To this end Lew said he was duped. He had relied on public statements made by Myer’s chief executive and the architect of its transformation strategy that, other than a difficult January sale period, the company’s prospects were improving.

How this plays out over the next few months might depend on what Umbers tells the market on Myer’s investor day update in early November.

If the prospect of a revival in trading is missing from Myer, Lew’s arsenal only gets more potent.

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