Department store chain Myer reported worse-than-expected results today, and Myer CEO Bernie Brookes was quick to cite two familiar reasons: employment costs are too high and Myer is disadvantaged because online retailers from overseas aren’t required to pay GST. It’s a highly selective argument, and very poor basis for claiming that we need to change the rules for online shopping.
Picture: Getty Images
First things first: Myer made a profit of $127 million for the full year. That might not thrill the company or its shareholders, but it isn’t going broke. Making less money than you want is a pathetic excuse to argue that people should be paid less.
Yet this was the comment Bernie Brookes made about the results:
All Australian retailers are being impacted by rising employment costs, escalating occupancy and utility costs, and a GST loophole providing an unfair advantage to foreign retailers.
Let’s examine how true that is in the case of Myer. Earlier this year, we noted that many of the claims Brookes made about what staff were paid didn’t survive close scrutiny. I’m not going to revisit that part of the argument here, though it does remind us that Brookes’ comments on wages deserve careful checking. Instead, I want to look at something much simpler: the claimed ‘rising cost of employment’ and how Myer compares to its peers.
In FY2013, Myer spent $461,582,000 on “employee benefits” (that is, paying its staff). In FY2012, it spent $442,668,000. That’s a percentage rise of around 4.2 per cent year on year. Its claimed staff total (12,500) is the same as in 2012, so we can’t attribute any of the change to a shift in employee numbers.
How atypical is a 3.1 per cent rise? In the same time frame, the wage price index (WPI), which measures changes to hourly wages, went up by 3.0 per cent. So Myer’s staff bill has gone up more than for Australian industry overall.
Interestingly, it has also gone up faster than the retail sector overall, where the WPI rise in the year to June was a lower-than-average 2.7 per cent. End result? Myer can legitimately claim that its wages bill is rising faster than normal (a result I’ll confess surprised me given its elastic approach in some statements about labour costs in the past), but it can’t really make the same claim for the retail sector as a whole.
On the question of GST, it’s a simpler story and one which favours the Myer argument a lot less. We’ve often made the point in the past that goods from overseas are already so much cheaper, even when postage is included, that adding another 10 per cent to the cost wouldn’t make them less appealing. They would still come out ahead.
A quick visit to the Myer site confirms that remains the case much of the time. One current special offer is for a Minx Go Bluetooth speaker for $249. I can easily locate one on eBay for under $200, postage included. Add 10 per cent and I’m still ahead. Myer will sell me Operation for $44.95 plus postage. I can have it from eBay for $30, postage included.
What’s truly annoying about all this is that Brookes’ comments will be endlessly repeated in business media and TV news and held up as “evidence” that we need reforms in both these areas. The numbers don’t show anything of the sort. They may well show Myer faces challenges as a business, but they don’t make any kind of strong case for changing Australian legislation for retailers overall. We’ve heard this argument before (hello, Gerry Harvey); I’m sure we’ll hear it again.
And why does this matter to Lifehacker readers? Because if the cost of goods from overseas is going to be forced up in order to make Australian businesses more competitive, we need to know that enacting those rules would actually make a difference. In the case of Myer, which is arguing that it would, it wouldn’t necessarily.
Similarly, if retail workers are going to have their pay lowered, that should not be based on a claim about rising costs based on a single retailer. The reality is more complex.
[Results via SMH]