After David Jones' collapse in Australia, attention turns to Myer

Australian upmarket department store chain David Jones has gone into administration and will close 19 of its 38 stores. The collapse has prompted the question of whether similar trouble awaits its longtime rival Myer, where entire floors appear to be permanently on sale.

Sales growth with caveats

Myer's sales rose by more than 10% to A$4.1bn in the last financial year. The increase was not driven by stronger demand but by the addition of the apparel chains Just Jeans, Jay Jays, Portmans, Dotti and Jacqui E, which Myer bought from billionaire Solomon Lew's Premier Investments. Its annual report says it used higher-than-planned promotional activity to stimulate demand, which cut profitability. Myer also wrote down the value of its brands by more than A$200m.

Market researchers IBISWorld say department stores have suffered a sustained erosion of relevance over the past five years, as online platforms attract bargain-hunters and specialists such as beauty retailer Mecca adapt faster to changing tastes. Both David Jones and Myer have been burdened by long-term property leases tied to underperforming stores.

Myer's advantages

David Jones fell into administration under mounting debts, while Myer ended the last financial year with a A$100m net cash buffer. It has already cut its store count from 60 before the pandemic to 56. For now it continues to offer discounts and hopes for more profitable trading conditions, while also shifting towards online sales.

Myer shares trade around 24 cents, compared with a float price of A$4.10 in 2009. They rose on the day David Jones entered administration. Roughly two in five Myer stores share a shopping centre with a David Jones outlet, so investors are betting the closures will lift Myer's market share. In the short term, pressure on Myer may grow because the David Jones stores slated for closure must clear stock through widespread promotions.

Brian Walker, chief executive of The Retail Doctor Group, said: "Myer is financially stronger, but strategically still pretty vulnerable."