DESPITE the Reserve Bank of Australia ‘pulling the rug’ from under the consumer with its last interest rate hike, Myer chief executive Bernie Brookes is confident the department store giant’s investment into the Gold Coast is a safe bet.
Myer recently opened the doors to its Robina store as part of a $90 million expansion of Robina Town Centre, while another is to be built at the Coomera Town Centre in 2013 as part of Westfield’s $1 billion investment. It also has a store at Pacific Fair.
Addressing business leaders at an Australian Institute of Company Directors luncheon, Brookes was disdainful of the RBA’s decision, but believes a consumer-led recovery is still possible – in the right areas.
“We are starting to see consumer sentiment improve, the Westpac consumer index was up but is just taking a punt now after the interest rates rise. The Reserve Bank has deliberately pulled the rug out now for the consumer to spend by making sure part of the money in their pockets is going elsewhere on mortgages,” he says.
“That on top of higher electricity prices, high water and rates, they’re finding it pretty difficult. I think it’s now going to be a lot slower burn back from what it was in the 2008 global financial crisis. I thought we would have a very good 2011 – I think it’s going to be an average ‘11 now because of the subdued nature of spend, because of what the RBA has done with interest rates.”
He says Myer is now playing catch up with its expansion strategy, with an additional 15 stores planned by 2014 equating to 80 in total by 2015. It includes stores in Townsville and Mackay. The group, which was bought out by private equity player Texas Pacific Group for $1.4 billion in 2006 has invested $540 million into its brand over the last four years.
“We are playing catch up - remember we haven’t opened any stores for a long period of time. You need between a 125,000 and 175,000 people in a catchment area to make a department store successful,” he says.
“We’ve got that comfortably at Robina. Coomera will be a case of build it and they will come and we expect that people will drive down from Beenleigh and up from Runaway Bay. You are going to see a destination, it will be successful centre, it’s a Westfield Centre, but it’s going to be one that people transit to, while Robina we should have built four or five years ago.”
Brookes identified the Robina shopper as ‘modern’ and contemporary with demand for suits and ties strong. However it’s still too early to gauge the strength of Myer’s customer reward system where its top card membership averages individual spend of $33,000 across just 170 members Australia-wide.
“Our research discovered that our top card holders often use multiple credit cards, not because one might be maxed out, but because it’s easier to disguise spending,” quipped Brookes.
Brookes told Gold Coast Business News that Myer’s growth is dependent on what was once a two-speed economy, but is now multi-speed and reliant upon factors such as regional versus rural and low socio economic versus higher average income areas.
“The term two-speed economy is quite different today, it’s patchy in locations,” says Brookes.
“Anywhere there’s tourists involved it’s difficult, anywhere there’s mining involved its going particularly well. Rural Australia in large areas is going reasonably well; smaller rural areas are finding it difficult.
“The Gold Coast and Maroochydore stores are pretty typical of the environments for us, but Townsville because of the investment up there will be a good store for us while Cairns is finding it hard because of tourism. So the two-speed economy is probably a multi-speed economy depending on what the driver is.”
Myer turned a profit of $271 million in FY10, while 2011 Q1 sales were down 1.5 per cent to $706 million. It has forecast 10 per cent growth by 2015.
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