report in the herald, page-5

sorry splitview disregard my last post this is it

Mystery buyer for Miller's
By Katherine Jimenez
19jan05

AILING discount variety retailer Miller's Retail could be in for a shake-up amid speculation that a mystery buyer is accumulating its shares.

About 24 million Miller's shares have changed hands since the company revealed a profit downgrade last Friday. The share price has jumped 24c to $1.10 in that time, including a rise of 11c yesterday.
Sources said the activity was led by one buyer -- possibly a private equity company such as Catalyst -- accumulating shares via UBS.

UBS bought more than 4million of the 9.2 million shares that traded yesterday, at price of between $1 and $1.11.

The investor could have amassed a stake of up to 9 per cent and could seek to make changes in the company.









Speculation about the future of Miller's -- the owner of Katies and Go-Lo -- has been running rife for some time.

Miller's co-founders Ian Miller, who has a seat on the board, and chief executive Gary Perlstein own nearly 20percent of the stock.

But there have been suggestions that Miller's might need to close or sell parts of its business and make management and board changes.

Last year Brett Blundy, the founder and biggest shareholder of retailer Brazin, stepped aside to make way for a new chief executive.

Last Friday, Miller's issued its second profit warning in less than seven months. It advised that full-year earnings before interest, tax and amortisation would be cut by $5.2 million to $43million, after a disastrous first half in which earnings were savaged by up to 20 per cent.

The collapse in earnings was again blamed on fierce price competition from struggling rival New Zealand Warehouse Group. Price cuts in that discount variety space, poor sales in part due to supply chain issues and a "meaningful" reduction in currency gains were also blamed.

Citigroup Smith Barney immediately slashed its target price and 2005 and 2006 profit forecasts.

It questioned Miller's ability to meet its new forecast, highlighting the thin cash flow the company had to meet debt repayments. "Bank support is likely to be highly dependent on a clear turnaround in operating metrics," Citigroup said.

Miller's supply chain was another concern for the analyst.

Macquarie Bank described the first-half performance as "disappointing" and said it was surprised by the "scale of deterioration" in the apparel business. It also had concerns about its supply chain. "This is the second Christmas in a row that one of Miller's divisions has been impacted by supply chain issues," Macquarie wrote.

It concluded by saying "we expect things could get worse before they get better".

Other industry observers agreed. Miller's discount variety business would struggle to compete with powerful rivals such as Coles Myer, Woolworths and Warehouse and had other problems in its apparel business, they said.

Macquarie said that one of management's key initiatives last year was to lift its price points to raise margins. "This initiative appears to have failed to gain traction," it said.