Struggling retailer Myer Holdings Ltd (ASX: MYR) is releasing more details from its plan to rejuvenate its sales and share price.
Fairfax media reported this morning that Myer was dumping up to 100 brands from its stores while simultaneously reducing the number of permanent staff and cutting hours for part-time and casual employees.
The decision to dump brands is to me the logical next step for Myer, which has already taken several steps towards becoming a premium fashion retailer by establishing its own in-house brand of clothes.
Cutting underperforming brands is necessary to improve the performance of Myer's floor space – bearing in mind that the business has high fixed costs as a result of the size of its stores. Not coincidentally, a similar strategy is being employed at recently privatised retailer David Jones, which saw sales rise a staggering 6.4% in the year to June.
It's hard to argue that new or different brands is a bad idea for attracting new customers, but I'm not so positive on Myer's other decision to slash staff numbers.
Fairfax media reported that some stores have as many as 90% of their staff members employed in a full-time capacity, which could understandably result in a lot less flexibility to cut expenses during slow sales periods.
In that sense the changes appear sound but media reports also indicate that the hours worked by part-time and casual staff are expected to decline by 20%. 'It's hard to find a staff member' is a criticism occasionally levelled at Myer and my experiences in its Queensland stores has corroborated this.
Myer appears to be having trouble attracting new customers and I'm not sure that trimming overall staff hours is the solution to the problem. While management's focus on costs is to be commended, it appears that the stores need to be made more user-friendly and having capable, friendly staff is part and parcel of engaging customers.
This is particularly so for new or infrequent customers, which is the demographic Myer needs to win over if they're looking to boost sales.
In an interesting comparison, Woolworths Limited (ASX: WOW) recently announced plans to dramatically increase the number of staff hours worked per week as part of its mission to boost sales and win back market share from Wesfarmers Ltd (ASX: WES). Of course, the grocery business is not the same as consumer discretionary but it is something to keep in mind.
From today's media reports I see some positive (the cutting of brands) news and some events that may turn out to be a negative or positive (the adjustment of staff hours). Myer's new CEO looks to be putting in a decent effort to turn things around and I see no reason for existing shareholders to sell out.
That said, Myer also has a record of market underperformance that will be easy to live up to and difficult to replace, which is why I'm steering well clear of the company even now.
