Department store giant Myer announced two things today.
The first was a huge profit downgrade, which has sent its shares plummeting more than 12% in early trade.
Interesting to note that in all his commentary on the trading update, chief executive Bernie Brookes blamed falling sales on weak consumer confidence and poor weather – those nasty overseas online retailers that Brookes railed about last month didn’t even get a mention. In fact, the company is still yet to officially announce its much-hyped Chinese website, saying only that a new redesign was launched on February 1.
The second announcement was the acquisition of a 65% stake in fashion company Sass & Bide, headed by Australian designers Sarah-Jane Clarke and Heidi Middleton, for $42.25 million, valuing the entire thing at $65 million.
Myer will become the exclusive retailer of Sass & Bide, and will roll the label out in over 30 stores in the next 18 months. Brookes described the deal as “delivering a highly profitable business with significant growth potential”.
But of course, it’s not so long ago that Sass & Bide wasn’t looking so healthy.
Back in March 2009, Clarke and Middleton sold a large stake in the business to veteran ragtraders David Briskin and Daniel Besen (best known as past owners of the Mimco accessories chain) to secure a $1.5 million loan.
While Briskin, who became CEO in the deal, assured SmartCompany that the brand was not in trouble, it does appear that there was a tonne of room for improvement.
According to Myer’s announcement today, Briskin has helped lift sales by 50% per annum in the past two years, with revenue running at an annual rate of $37 million. The company has 15 retail stores, with plans to roll out more in the next 18 months – in addition to the Myer roll-out.
What’s not clear is who gets what out of Myer’s $42.25 million. The parties are not saying whether Middleton and Clarke have now sold out of the business, although that does not appear to be the case. Certainly all key staff are staying on, with Briskin to continue to run the business as a stand-along unit.
Whatever the exact final details, Briskin and Besen appear to have created (and at least partially restored) a lot of value in the business.
And in a retail environment as difficult as the one we are in right now, that’s impressive.
James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
