Canberra Myer deal offers hope for retail giant
Myer boss John King has had a win with his landlord that could fill the rest of the retail sector with enough confidence to play hardball over rental agreements.
A Myer store in Canberra, which was slated to be shut down, is now staying open with reduced floorspace after King struck a deal with shopping centre owner Scentre.
Following through with his promises when he joined Myer as chief executive last year to reduce the department store’s bloated store network, King will keep open the Myer in Belconnen with a new lease agreement that sees the store reduce its floorspace from three to two floors.
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Sweetening the deal, Scentre will invest in the ACT store to provide an enhanced shopping experience for local customers, with Myer also chipping in some funds.
It comes as retailers engage in an ongoing war with shopping centre landlords to come to the table with rent reductions and more investment in fixtures and refurbishments in the face of a downturn in sales and a drop in traffic to some shopping centres.
Retailers such as billionaire Solomon Lew have repeatedly threatened to close stores and walk away from shopping centres if rents are not reduced to reflect the economic conditions, and in many cases have followed through with that threat. In 2017 Specialty Fashion Group, the company that was behind brands such as Katies, Millers and Rivers, said it would be forced to close down more than 300 stores, or about one-third of its store network.
Myer chief executive John King struck a deal with Scentre to keep its Canberra store open.
Last week, the struggling Reject Shop said it would investigate its future property requirements. After its landlords were able to offer a better rental deal on a portfolio of stores, it will now close down seven sites by the end of June.
Myer has been under pressure to drastically reduce its shopping centre locations to return the retailer to stronger profitability and shed unwanted locations.
King and Scentre chief executive Peter Allen yesterday announced, as part of their joint portfolio partnership discussions, that the Belconnen store will remain open, with new lease agreements.
Refurbishment works will be undertaken across a reduced floorspace, creating a two-floor, 12,000sq m store with an improved retail experience and an increased number of new and exclusive brands.
“This is great news for our loyal customers, team members and, importantly, for the local community,” King says. “This is an example of Myer’s Customer First Plan in action, where we are looking to work … constructively with landlords to reduce space, improve our stores and, most importantly, to enhance our range and brands for our customers.
“(This) announcement demonstrates the strong partnership we have with Scentre Group and our shared commitment to a strong and sustainable retail sector in Australia.”
Credit Suisse analyst Grant Saligari says the decision to keep open the Myer site in Belconnen but negotiate a smaller floorspace is in keeping with King’s strategy to right-size the business.
“It is quite in keeping with the Myer strategy that through John’s tenure it is not so much a case of fewer stores in total but making the stores more productive by reducing the overspace and treating it as a portfolio of stores and negotiating outcomes in that way,” Saligari says.
Myer is about to kick off its winter sale, and fashion retailers up and down the country are hoping for cooler conditions to help shift winter stock.
This article originally appeared on www.theaustralian.com.au/property.
