Myer’s tepid first half

MyerBourkestreetDepartment store chain, Myer, has lifted profits 5.3 per cent to 62.8 million in its first half results, though saw sales slumped in the face of “aggressive competition with heavy discounting both before and after Christmas and patchy consumer confidence”.

Sales declined 0.6 per cent to $1,784.6 million with second quarter sales down 1.3 per cent to 1,065.4 million.

Operating gross profit margin declined by 41 basis points to 38.3 per cent while CODB/Sales improved by 77 basis points to 30.2 per cent.

EBITDA increased by 2.7 per cent to $142.2 million.

“Myer delivered encouraging sales around the key trading periods of spring racing and Christmas offset by subdued sales during the stocktake sale, resulting in modest comparable store sales growth for the half,” said Richard Umbers, CEO and MD, Myer.

Umbers said sales performance during the stocktake sale was influenced by both implementing a strategy of reducing markdown dependency and the emergence of widespread discount fatigue among consumers.

Sales in concessions grew by $76.5 million to $386.2 million while sales in Myer Exclusive Brands (MEBs) were down by $39.4 million to $300.2 million, which ‘continued the shift in mix resulting from the strong customer response to concession brands and weaker performance in MEBs”.

“We are well progressed in the rollout of upgraded installations and service models for three MEB master brands; Basque, Piper and Blaq across 33 stores,” said Umbers, who asserted “customers have responded well” to the launch of Myer’s new store at Warringah Mall with sales per square metre up 38 percent compared to FY2014 when the store last traded without centre disruption.

“During the period, the merchandise range was further enhanced with the introduction of approximately 700 new or upgraded installations,” he said.

Myer’s online business grew sales by 48 per cent during the half, which Umbers attributed towards a better online CX “together with significant improvements in pick, pack and fulfilment”.

“The focus on store footprint optimisation continued with the recent closure of three stores at Wollongong, Brookside and Orange.

The department store chain has also trimmed its support office operations, recently handing back over a third of the space at 800 Collins Street.

“We continue to make good progress in developing a simplified business model,” said Umbers. “This is demonstrated by the rollout to stores of a workforce management system, more simplified administration processes for store back office and the appointment of external providers to manage our customer support centre and digital services.

“This result also demonstrates the strength of Myer’s balance sheet and operating cash flows which support our ongoing investment in the strategy while at the same time generating returns to shareholders,” he said.

Myer said sales in January and February were below expectations with January being the low point, and “based on the expectation that those conditions do not return” that it would achieve sales and profit growth over the remainder of the year.

“We are 18 months into our five year transformation and I am pleased with the progress we have made,” said Umbers. “We are a better and stronger company as a result of the New Myer strategy”.

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