Customer-first strategy proves profitable for Myer

Myer CEO John King’s turnaround plan passed its first real test on Wednesday when the retailer reported a 3.1 per cent year-on-year increase in net profit after tax in the first half of FY19 to $41.3 million.

Total sales fell 2.8 per cent to $1.67 billion and like-for-like sales fell 2.3 per cent in the half, which King told investors reflected the company’s move away from discounting and increased focus on improving store profitability and growing online moving forward.

Online sales were up 18.6 per cent in the half to $151.2 million, buoyed by a strong Q2, in which Myer did over $10 million in online sales over Cyber Weekend and had its biggest online sales day ever on Boxing Day.

Operating gross profit margin improved 99bps to 38.5 per cent in the half, thanks to a renewed focus on exclusive brands. The company revealed that it is in the process of introducing more than 20 exclusive-to-Myer brands, most of which are international brands.

The department store noted a 1.3 per cent improvement in its cost of doing business in the half, which it attributed in part to the rollout of a new workforce management system, which has improved its ability to roster employees to meet customer demand.

EBITDA improved 4.9 per cent to $113.6 million.

“This result demonstrates the positive customer response to a number of initiatives from our Customer First Plan, particularly during the all-important Christmas and Myer sale periods,” King said in a statement on Wednesday.

The turnaround plan, which King announced last September, is based on three key priorities: transforming the customer experience in-store, expanding the company’s ‘Only at Myer’ brands and categories and offering value for money and improving Myer’s online offering.

The retailer implemented a number of customer-centric initiatives in the half, including improving store layouts and localising merchandise in 23 stores in the network, and relaunching Myer’s ‘MyStore’ campaign, which King said has been well received by customers.

Myer also launched a new website in October, which King said performed well during the major online shopping events in the half. The retailer is now looking to increase the number of products it offers online, which will enable it to reduce its selling area in certain centres, and to move the fulfilment of online orders from stores to a centralised distribution centre.

In a call to investors on Wednesday, King said there is still a lot of room to cut costs and improve profitability by reducing the size of certain bricks-and-mortar stores in the network and improving the range and service in stores.

Comments

2 comments

  1. Avatar

    Darrell Wisbey posted on March 6, 2019

    Pleasing to read there has been an improvement however do not lose sight of what will really build the path for sustainable retail success: 1. Improving bottom line by way of cost control is not a long term answer to retail success 2. Total sales whether in-store or on-line are still sales and need to show total growth 3. Real retail success comes from increasing the visits and spend of satisfied customers 4. Customer service - human and technology driven - requires a different attitude in retail today 5. Retail changes faster today than ever before and often the future is lost in the frantic chase for immediate success 6. Retailers have trained customers to forget loyalty and instead to chase the discounts 7. Retail whether in-store or on-line requires clear and targeted customer relevant strategies I hope the improvement continues however I suspect the truth is covered by short term costs controls which are then presented as validating everything is going to be okay? reply

  2. Avatar

    Joan posted on March 23, 2019

    Do agree with Darrell. Retail would go slow in 2019-2010, for shirking disposal income from targeted customer groups. At the bad time, supportive suppliers, logistic companies and customer care are vital aspects to hold the connections between not-much-left loyal customers and a company. (Just saying, cutting down cost: what if quality of products can not reach certain standards, staffs treat customers impatiently due to cutting down shifts. Will you come back?)At least, make everything at break-even.. ...; Retail, especially fashion, or trend-oriented business change very fast. A company does require some experienced staffs to sell high-ticket products. Online purchasers, they are young generations to purchase low value items with frequent buying behaviors. Short-time... .... Elderly people still have some habits to go to store to see, and to try before buying it. Old is gold... It is at the perspective of business. Short-term profit does look great on P/L statements. It will boost P/E ratio (if cost is managed well). Here is a question: Does brand value will go down (at balance sheet)? I am not sure... Just see what you want in business. reply

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