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Department store Myer has announced that its Board will downsize by two members following yesterday's letter issued by shareholder Wilson Asset Management. 

Non-executive directors Lyndsey Cattermole AM and Julie Ann Morrison have decided to retire as non-executive directors at the upcoming AGM and do not intend to seek re-election. 

Myer will not replace these positions, reducing its board size to five directors including its CEO and MD.

The news follows the letter issued to Myer chairman Gary Hounsell from Wilson Asset Management chairman Geoff Wilson, which called on the department store to reduce the number of directors and their fees. 

In the letter, Wilson urged Myer to permanently reduce the directors' fees and also sought to clarify whether or not suppliers had distanced themselves from the retailer, following fellow shareholder Solomon Lew's recent comments

"As a shareholder, we believe it is appropriate for the Board to reduce the number of directors and their fees in a necessary alignment with companies of a similar market capitalisation," Wilson wrote. 

"I note in the 2020 Annual Report that the non-executive directors have accepted a "16.7% fee reduction in response to the impact of COVID-19 on Myer's investors, customers, team members and the community more broadly." 

"Our belief is that the reduction needs to be permanent. 

"We would also call on the Board to reduce the directors' aggregate fee pool to reflect the current market capitalisation of Myer. 

"In light of recent speculation, can you comment on any material changes to commercial agreements with suppliers?" Wilson continued. 

"Please clarify whether any suppliers, including those associated with Solomon Lew, have withdrawn from their commercial agreements with Myer. 

"Can you also confirm suppliers can still obtain credit insurance cover," Wilson said. 

In response to this letter, Hounsell said that the directors' fees have already been reduced and this reduction will be in place for two years. 

"Following the decisions of Lyndsey Cattermole AM and Julie Ann Morrison to retire from their roles at the upcoming AGM and not seek re-election, the Board will be reduced to five directors, including the CEO and managing director. 

"As outlined in the Annual Financial Report...the chairman and non-executive directors annual base fee will reduce to $250,000 (from $300,000) and $100,000 (from $120,000) respectively.

"This represents the third reduction to chairman and non-executive director fees since FY18 and will remain in place for at least two years.

"Regarding the current maximum aggregate fee pool limit of $2.15 million per annum, this was originally set in November 2009, at the time of listing, and bears no relevance to the current fee structure for directors.

"Following the retirements of Lyndsey Cattermole AM and Julie Ann Morrison, the total annual fees payable will be $570,000, representing 26% of the maximum pool," he said. 

Hounsell added that the Board will review the maximum fee pool size before the 2020 AGM to ensure it aligns with the business' current position. 

In terms of its supplier partnerships, Hounsell said that the business must evolve its offering to suit the market conditions and demands but has maintained the support of its supplier partners. 

"Myer must constantly evolve its merchandise range to respond to customer demand.

"Most recently, during COVID-19, we’ve seen significant increases in customer demand for some categories and brands, and decreases in others, and Myer must adjust its range accordingly. 

"Myer confirms that during this time of unprecedented uncertainty across retail as well as the broader economy, Myer has maintained the support of its merchandise supplier base and continued to pay its merchandise suppliers either according to existing contract terms, or better.

"Furthermore, Myer recently announced an amendment and extension of its financing facility to August 2022, giving further confidence to Myer’s suppliers," he said. 

Hounsell added that trade credit insurance agreements are reached between suppliers and insurers, but was aware that two trade credit insurers have cancelled their cover of Myer suppliers during the pandemic. 

"Regarding trade credit insurance, these are arrangements entered into between merchandise suppliers and insurers and Myer is not party to those arrangements.

"Myer is aware that two trade credit insurers have withdrawn cover to Myer merchandise suppliers during the pandemic, however, this is in the context of a tightening of cover of the retail sector globally, which has been occurring for some time, and is not specific to Myer.

"Additionally, Myer has not lost any key or valued merchandise suppliers as a result of trade credit insurance issues, and continues to receive the product that the Company needs and, as stated above, continues to pay all merchandise suppliers in accordance with agreed terms, or better," he said. 

As a final note, Hounsell said that the business intends to return to dividend payments when it is able to do so. 

"The Board confirms its intention to return to dividend payments, and to distribute the associated franking credits, when it is prudent to do so, taking into account the Company’s financial and trading position, as well as requirements under the Company’s financing arrangements," he said. 

The news follows Myer's FY20 results in which the retailer reported a 15.9% drop in sales for the 12 months to June 30.

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