Analyst questions Myer's youth strategy

By

Sandra Halliday

Published
May 30, 2017

Australia’s largest upmarket department store operator Myer is likely to face short-term disruption in its youth fashion segment following the collapse of Topshop Australia, of which it owns one fifth, wrote a financial analyst on Tuesday.

Myer announced last week that the Australian franchisee of Topshop Topman had appointed administrators, but that the 17 branded concessions in Myer would continue to trade as normal.

However, these concessions are likely to be at the chain’s flagship and premium sites and could hurt the group’s sales as supply of stock for young shoppers is likely to be impacted. A fire sale could be equally damaging, wrote a journalist on The Australian.

The newspaper had access to a note from Macquarie Wealth Management, which said: “The use of Topshop/Topman as anchor brands in youth apparel exposes Myer to risk in maintaining supply over the short term as administrators step in. Any clearance activity or store closures during this period could also impact profitability of sales for Myer.’’

Myer bought a 25% stake in the Topshop Australia in 2015 in a bid to attract younger consumers and expand its youth apparel offering. It launched branded concessions inside Myer stores, highlighting the brand’s appeal among young shoppers.

Despite relying on the label, Myer’s stake fell to 20% this year as the company declined to participate in an issue of new shares. The value of the investment in the business was also written down from $9.2 million to $7.2 million.

Now in the hands of administrators, the collapse of Topshop Topman Australia could have catastrophic consequences for Myer.

The company needs to secure access to other youth fashion and apparel brands to maintain its appeal to this key demographic in the long term, according to Eli Greenblat. Labels like Inditex’ Zara and Swedish fashion chain H&M are performing well in Australia, and could help the retailer deliver a stronger youth fashion strategy.