Mystery Myer share buyer sparks takeover speculation: Is the department store becoming more like Amazon?
Tuesday, March 28, 2017/
A mysterious $94 million share buy-up on Monday afternoon has sparked speculation that Myer could be the target of a possible takeover, with retail experts saying the purchase shows the department store turnaround is working.
At 3:28pm (AEDT) yesterday, 81.7 million shares were traded in Myer, worth $93.9 million, according to CommSec. The shares were bought for $1.15 and saw the department stores’ share price spike 18% for the day, with 12 times as many shares being traded on Monday as had been on the previous Friday.
The purchase sparked immediate speculation that a potential takeover was on the cards, and this morning News Corp and Fairfax speculated that billionaire retailer and chairman of Premier Investments Solomon Lew is the mystery buyer.
The Australian pointed to Lew’s long association with the Myer business and the fact that the shares were brokered by Pershing Securities, which Lew previously had used when purchasing a 10% stake in Australia’s other big name department store, David Jones.
Myer is in its third year of a five-year strategic turnaround plan put in place by chief executive Richard Umbers, which involves closing down unprofitable stores and chasing higher-end customers by revamping its flagship sites and moving to highly-curated concession fitouts.
The department store’s most recent half-year results saw a 5.3% increase in net profit after tax to $62.8 million, with management spruiking a smaller, inventory.
In its presentation to shareholders earlier this month, Myer boasted its inventory was $5 million below this time last year. Sales in the company’s concession brands grew by $76.5 million for the half, while sales of Myer “home brands” were down by $39.4 million.
Retail expert Dr Gary Mortimer, an associate professor at Queensland University of Technology Business School, says that while he also suspects Solomon Lew is the buyer of Myer’s shares, whoever has made the move has recognised this is the perfect time to buy into the new store model.
“Whoever’s bought it has looked at the Myer business and is going, ‘it’s got rid of all the dead wood’,” Mortimer says.
“Myer has become like a small shopping centre, with the likes of Topshop and apparel and cosmetics that have [been] bought into that business [as concessions].”
Is the Myer of tomorrow like the Amazon of today?
Like more local retailers, Myer chief executive Richard Umbers has his eye on Amazon.
In discussion of the company’s results earlier in March, he promised not to give the online retail giant a “free kick” when it arrived in Australia, saying the “New Myer” will be delivering a competitive offer when the time comes.
While retail analysts have marked Myer as early as last week as intensely vulnerable to the likes of Amazon, Mortimer says Australian bricks-and-mortar department stores are actually transforming to be more and more like the global retail giant when it comes to strategy.
“I think that’s a good way to look at it — the department store of tomorrow is the Amazon of today. Amazon and Alibaba for example are simply platforms where small business and big brands can sell direct to consumers and let them buy,” Mortimer says.
“With Myer, having a store within a store [with concessions] means you can run a department store but not own too much inventory. The brands and fashion labels carry their own inventory and pay their own staff. Whoever has bought into Myer last night has realised it’s probably the perfect time to buy.”
As it tries to connect directly with customers, the department store has also engaged in a number of strategic partnerships with marquee tech and consumer goods brands, as well as signing on with payments platform Afterpay to let shoppers place orders via the Myer online store and pay for them later in instalments.
“We want to make it simple and easy for our customers to shop with us and partnering with Afterpay will give our customers more ways to purchase their favourite items online,” the company’s chief digital and data officer Mark Cripsey said in a statement provided to SmartCompany on the announcement of the deal.
The department store has also entered deals with Uber and Tesla to try to tap into the lifestyles and interests of its customer base.
Aside from these deals, the focus for the year ahead will be lowering the wholseale inventory mix while maintaining profitability, with the company telling investors earlier in March the goal is to “focus on increasing sell-through rates” and “manage exit of clearance without impacting profit”.
SmartCompany contacted Myer for comment on the share purchase this morning but did not receive a response prior to publication.