Down at heel: Retail has a hard road ahead, Myer’s boss says.MYER boss Bernie Brookes has described Australia’s retail landscape as a ”tale of woe” where sector growth will remain below 3 per cent for the next few years due to consumer angst over rising energy prices, steeper healthcare and education costs and the carbon tax.
The chief executive of the country’s biggest department store also warned that higher penalty rates and the current industrial relations framework would lead to many shops shedding staff and reducing their trading hours.
Speaking at a Financial Services Council lunch in Melbourne yesterday, Mr Brookes said the pain was being felt across the discretionary retail industry and that he feared further company collapses following a string of failures in the past two years. ”What we are seeing in retail is really a tale of woe, we are seeing the most difficult time I have encountered in nearly 36 years that I have been involved in retail. I have not seen it as difficult, as consistently difficult, than what it is today,” Mr Brookes said.
While the strong dollar was encouraging shoppers to surf the web for better deals overseas, a weakening of the currency could trigger a new round of corporate collapses. ”There is no doubt a lot of stores are hanging on, they have got high levels of inventory and are hanging on despite the high level of the Australian dollar being generous to them in their buying prices,” he said. ”If we see the Australian dollar come off, [it is] going to be more expensive for them [shops] to purchase the product, and therefore we could see quite a few more stores go into significant issues.”
Asked about future growth rates, Mr Brookes said he remained sceptical about the discretionary retail sector squeezing out even 3 per cent growth in the short term.
”I think if the discretionary retail sector grew by 3 per cent, it would be a fantastic opportunity to get back into some of the metabolism of good growth and good profitability and, more importantly, good prices for the consumer.
”I don’t see 3 per cent growth in discretionary retail in the next year and perhaps the year on. This is a tough market and it isn’t going to improve overnight.”
Myer has already trimmed its forecasts, warning that its full-year profit will be as much as 15 per cent below last year’s performance, while rival David Jones has warned of drooping sales and profitability this year. Mr Brookes said data flowing from the company’s 4.1 million MyerOne club card members showed they were worried about higher energy prices as well as the rising costs of healthcare and education. The carbon tax was also holding back spending.
He said the Fair Work Act meant stores would be forced to close early in the face of massive penalty rates that staff had to be paid. ”There will be stores closing on Sunday,” he said. ”With the reintroduction of penalty rates, you are going to see not only stores close but also shopping centres close.”
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