It was meant to be a glitzy retail flagship located in the heart of petrodollar paradise. In July last year, leading designers Wayne Cooper and Leona Edmiston were all queuing up for a slice of the floorspace in Myer’s gleaming new Dubai store in the Ibn Battuta Mall.
But Myer’s Middle East expansion plans, announced in a blaze of publicity, are now in grave doubt. Last week, Dubai was effectively handed a $US10 billion bailout by the UAE, following the collapse in oil prices over the last year.
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Property prices have also tanked in what was once considered the region’s oasis, with developers, including Myer’s joint venture partner Nakheel, failing to stump up cash. Dubai’s sharemarket has lost 70% of its value.
Myer’s Dubai outlet was expected to open in October. The department store giant had also spruiked plans for a further four stores elsewhere in the UAE and Eastern Europe, a plan that now looks fanciful amid the turmoil on global markets.
Rosemary Masic, from designers Nevenka, says she hasn’t heard anything from Myer since the announcement last year, despite being promised space in the new stores.
Nakheel, Myer’s 50/50 joint venture partner in Dubai, is owned by state-backed property and racehorse overlords the Makhtoum family, the effective recipients of last week’s massive government bond issue.
Nakheel Properties, which owns the Ibn Battuta Mall, has hit the headlines in the last few days, with the Financial Times alerting readers to its enormous problems paying contractors and suppliers. Two Australians linked to Nakheel are also in jail in Dubai after the UAE claimed they were involved in bribes.
In December, Nakheel cut 500 staff or 15% of its workforce and abandoned a number of high profile projects, including the $US790 million Trump Tower monstrosity. Locally, Nakheel has a 10% stake in Mirvac and is a partner in Mirvac’s bid to develop the Bangeroo project in Darling Harbour, which now looks extremely unlikely.
Despite the downturn, total retail sales in the UAE are still tipped to increase by 12% over the next two years, according to a study released late last year. But subsequent events have shaken confidence in Dubai, with claims emerging that the desert capital could be close to economic collapse.
When the Dubai plans were announced, enthusiastic Myer chief Bernie Brookes said the store would be “an international-class department store”. “We will be a small but significant player [in the UAE]. Myer is one of the most iconic brands in Australia and we are proud to be taking it… to the rest of the world.”
But when Myer’s full year results were released in December last year, the language had changed, with the company saying the venture “could lead to the establishment of a joint venture, with limited financial exposure to Myer”.
In an emailed statement, Myer communications chief Mitch Catlin, said that “given the current global economic difficulties, we think there will be a push-back in timing which is understandable in the environment. In terms of eastern Europe, this was always part of a longer term growth plan and this continues to be the case.”
Retail analyst Rob Lake said he wasn’t surprised the Dubai store was under a cloud, with investment in the Middle East slumping to lows that would have been unheard of a year ago. But closer to home, the picture for Myer seems somewhat rosier, with growing evidence the firm is set to reap the dividends of the Federal Government’s stimulus package.
Yesterday’s jump in retail sales indicates that Australians who used the December stimulus package to pay down credit cards might be again racking up debt in anticipation of the extra $900 set to hit bank accounts in under two weeks.
Myer has also embarked on a program of cost-cutting with staff sacked in some stores and part-time hours pared back. The firm has been aided and abetted by a soft enterprise bargaining agreement with the shop assistants union, which allows the company to repeatedly slash hours by 20%. Last year Myer eliminated 20 marketing positions to cut costs and to please its private equity backers.
In February, Myer announced that first half sales had declined 3.7% to $1.762 billion, in line with expectations.
This article first appeared in Crikey