Changes to lease accounting in 2019 have significantly changed the way leases are disclosed in a retailer’s financial results. On the surface, this may seem like only a technical accounting issue. However, in Issue 9 of The Retail Mosaic, we explain the accounting, the distortions to profit margins, cash flow and balance sheet metrics and the real world implications from lease accounting.

Myer’s proposed merger with Premier’s Apparel Brands is a convenient solution for two ex-growth businesses. For Premier, the inferred multiple is only 4.1x EV/EBIT, which is low. Premier shareholders could receive 8.2 Myer shares, with upside through an estimated $55 million in synergies. The majority of the synergies will come from adding Premier to Myer stores in concession space and improved terms on sourcing product. The merger raises the prospect that a further Strategic Review for Premier is unlikely to crystallise much value.