Australia's Myer sees profit slump, writedown as board spill looms

[SYDNEY] Australia's biggest department store chain, Myer Holdings Ltd, warned first-half profit would fall up to 41 per cent and flagged a probable writedown, sending its stock to a record low and fuelling a major shareholder's call for a board spill.

The warning all but ensures more upheaval at the 118-year-old store following a steady run of profit downgrades and calls from billionaire investor Solomon Lew for the ouster of its entire leadership.

In a market update on Friday, Myer said a deterioration in trading in its busiest period, the December lead-up to Christmas followed by a January stock clearance, would result in its worst half-year profit since listing in 2009.

First-half sales fell 3.6 per cent to A$1.72 billion (S$1.78 billion) and first-half profit would be between A$37 million and A$41 million, from A$62.8 million the previous first half.

Myer expected to write down the carrying value of its assets, following a similar move by the owner of smaller rival David Jones, South Africa's Woolworths Holdings Ltd, a month earlier. It did not give an estimate of the writedown size.

"Myer is now in peril and shareholders must urgently unite to save the company and what is left of our investments," Mr Lew wrote in an email on Friday. Lew holds holds 11 per cent of Myer through Premier Investments Ltd.

Myer shares fell as much as 12.1 per cent to a record low of A$0.57, while the benchmark index was down 1.8 per cent.

The stock listed at A$4.10 in 2009 and has never traded higher.

The writedowns of Myer and David Jones frame a bleak picture for department store operators around the world as shoppers opt for broader product ranges from global online players like Amazon.com Inc, or specialty fast fashion brick-and-mortar stores like H & M Hennes & Mauritz AB.

Myer's response has been to beef up its online offering, shut underperforming regional stores and cut floor space in existing stores. Its online sales rose 49 per cent in the first half but still only account for a fraction of total turnover.

Myer executives did not publicly respond to Mr Lew's comments, although they have previously dismissed his campaign to unseat the board as a distraction from the recovery plan.

"I am in no doubt that our heightened focus on areas including online and productivity are correct for this low-growth environment, as evidenced by the strong growth in online sales in the first half," CEO Richard Umbers said.

Amazon's arrival in Australia in December has only hastened the inevitable decline of the country's department stores, a shift that is likely to continue regardless of who sits on Myer's board, analysts said.

"The price tension is already there, even though they don't have the scale," Morningstar analyst Johannes Faul said.

REUTERS