Myer’s loyalty customers will likely get access to a wider range of shops after the department store acquired a range of established businesses, in a move that is being described as a “big risk”.

On Tuesday it was announced Myer would become the largest fashion retailer in Australia under a mega deal with Premier Investments that will see it buy the Just Jeans, Jay Jays, Dotti and Jacqui E brands.

The merger will see Myer control more than 780 stores with almost 18,000 workers nationally, while Premier Investments will retain only its Smiggle and Peter Alexander brands.

The tie up fulfils a long-held ambition for Premier Investments chair and Myer’s largest shareholder Solomon Lew, but a leading retail expert says it is mostly upside for Premier and a “big risk” for Myer.

‘Big win for Premier’

Queensland University of Technology Professor Gary Mortimer said Premier is offloading its middle-market fashion brands while retaining more profitable stationery and sleepwear chains.

Myer, meanwhile, is taking on brands that are struggling to differentiate themselves in a weak consumer market and have more in common with Mosaic Brands, which has just collapsed.

“It seems to be a really big win for Premier and just a lot of risk for Myer,” Mortimer explained.

“Premier has offloaded some of those brands that sit in the same ilk as the Mosaic ones .. mid-tier discounting apparel brands, which are in direct competition with the likes of Big W, Kmart and Target.”

‘Interesting move’

University of Sydney retail expert Lisa Asher said the deal is an “interesting move” for Myer, which is looking to evolve in the face of stiff competition from global fast fashion giants.

Asher said Lew’s decision to take an even larger stake in Myer in the deal shows he’s invested in re-homing the apparel brands and wants to chart a path for Australian-owned fashion to succeed.

“This will mean Myer has the capacity to develop more private label and store brands, under either the Myer brand or other exclusive brands,” Asher said.

“This vertical integration of the supply chain is commonly seen in supermarkets, and it’s interesting to see this occur within main street and high street fashion.”

What the Myer deal means for consumers

Myer’s announcement on Tuesday was light on changes about direct implications that consumers will notice, instead focusing on how the merger will improve shareholder returns.

One change shoppers would notice if the deal goes ahead is that Myer One’s loyalty program will start being offered across Just Jeans, Jay Jays, Dotti and Jacqui E stores.

But beyond that, Mortimer said consumers won’t notice many changes if the deal proceeds.

“There won’t be any change in branding, just different ownership,” Mortimer said.

Myer’s board is unanimously recommending the deal to shareholders, saying it will be able to generate about $30 million a year in additional earnings through synergies and more scale.

Fashion behemoth

The deal will bring an additional $791 million in sales onto Myer’s books, which will transform the department store into a $4 billion-a-year business with $1.6 billion in gross profits over 2023-24.

Myer executive chair Olivia Wirth told investors during a phone briefing on Tuesday that the deal will deliver significant shareholder value and position Myer to capitalise on growth opportunities.

It comes after a big turnaround at Myer since Covid-19 under former CEO John King in which the retailer closed many stores, trimmed its range and focused on its loyalty scheme.

The acquisition of Premier’s fashion brands is a marked turnaround from that strategy as Myer will expand its store footprint dramatically and take on a range of brands nationally.

Asher said that if executed correctly the Myer deal will boost the department store’s profit margins and open the door to an evolution that can put Australian fashion front and centre.

“Australian provenance as a part of an exclusive brand, if done right, could be a way to offer products which are uniquely Australian,” Asher said.