Brookes makes carbon tax a scapegoat for results

POSTED May 24, 2012

MYER'S dismal third-quarter sales update yesterday provided another warning of the potential negative public relations fallout from the federal government's carbon tax.

There are many factors affecting the retail market, from overpriced goods and the competition from cheaper online shopping, poor-quality service and higher petrol prices to uncertainty about the world economy.

To this string of negative news, Myer chief executive Bernie Brookes made it clear yesterday retailers were now adding the prospect of a carbon tax and the perceived impact it could have on consumer sentiment.

Brookes informed long-suffering shareholders that instead of their net profit this year coming in 10 per cent lower than last year's $163 million, as they were told in March, things were actually getting worse and profits would now be 15 per cent lower than last year.

The Myer trading year finishes at the end of July, so it will take in only one month of the carbon tax, which comes into operation on July 1. And for a retailer facing some serious headwinds, whose shares are trading at about half the $4.10 they floated at three years ago (they fell by 7.4 per cent yesterday to close at just over $2), the carbon tax is a convenient whipping boy: another negative external factor that can be blamed by management for its own sales problems.

As Brookes said yesterday, the potential impact of the carbon tax on consumer sentiment, and thus retail sales, is as much about perception as reality. Myer calculates it will be paying a further $4m to $5m a year in costs as a result of the carbon tax, thanks to a combination of higher electricity costs and higher transport costs out of its total annual cost base of about $1 billion.

But the company's real concern is how much the prospect of the tax is weighing on the minds of worried customers.

"Consumers are seeing their electricity prices going up, and they're seeing the cost of transport going up, and they're going to see the cost of products going up," Brookes said.

"The perception is this (the carbon tax) is going to have another impact on their hip pocket to stop them from spending. There is the reality of how it will impact on the hip pocket and what the compensation level is, and there's the perception. We're fighting the perception that it's going to have a demonstrable impact on the consumer's hip pocket."

Brookes notes that in one state Myer was facing the prospect of a 37 per cent rise in its electricity bill during the next year.

How much of that is due to the carbon tax is hard to say, as electricity prices across the country have been soaring for years.

But it is not hard to see that every price rise in electricity and transport from July 1 onwards can be conveniently blamed on the carbon tax. The government announced $5bn worth of handouts in the budget, which it hopes will cushion the impact of the carbon tax. But, interestingly enough, despite even that irresponsible largesse with taxpayers' money, Brookes cited the budget as yet another negative for consumer sentiment.

"The budget didn't give any benefit to retailers and provided nothing to our consumers," he said, describing the measures in the budget as "part of the cumulative issues impacting on consumer sentiment".

One would have thought $5bn worth of handouts to the public would be seen as having the potential to provide some stimulus for retailers, but Brookes clearly doesn't see it that way.

All in all, not a cheerful message, except maybe for those who have short-sold Myer stock.

Whatever its actual effect, the perception of the impact of the carbon tax is something that will continue to be a negative for some time to come.