Myer's profit drops 4% as the big retailer rolls out its new strategy

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Myer’s half year profit fell 4% to $59.7 million but the department store says it’s happy with progress to turn around its business.

The result beat expectations of about $54 million. Total sales were up 1.8% to $1.79 billion, or 3.3% on comparable store sales basis.

Myer shares jumped by more than 10% to $1.21 in early trade.

CEO Richard Umbers says the store is only months into the first of a five year strategy.

“We are pleased with the early progress and positive customer response to initiatives delivered under the new Myer strategy, particularly in our flagship and premium stores,” he says.

Myer is running behind main competitor David Jones, now owned by South African company Woolworths Holdings. Expansion of private label brands helped David Jones increase sales by 11.2% for the half year to December.

Myer’s new strategy includes $480 million in capital investment and a target of greater than 3% improvement a year in sales between next year and 2020. The current financial year is a transitional one, carrying costs of the strategy.

For the half year to December, Myer recorded comparable store sales growth of 7.1% across 12 Victorian and New South Wales flagship and premium stores.

“This is a very encouraging result,” Umbers says. “We have a significant pipeline of further improvements and the team has a strong focus on execution.”

Umbers says Myer achieved solid trading over Christmas and the Stocktake Sale period with a strong customer response Christmas and new marketing campaigns.

Revenue from online business grew 70% on the prior year.

“This impressive performance results from our focus to deliver an improved omni-channel experience including an expansion of the instore iPad service, strong take up of Click and Collect and upgrades to the site,” Umbers says.

“The recent launch of the Myer eBay store which includes over 20,000 products, further extends the reach of the Myer brand, with 7 out of 10 Australian online shoppers already using eBay.”

Full year costs of the new strategy are expected to be lower than originally forecast. Myer expects this to be between $20 million and $30 million, rather than $35 million to $45 million.

This flows through to a slightly improved profit guidance. Myer now expects profit for the full year to be between $66 million and $72 million, compared to $64 million to $72 million previously, excluding the impact of implementation costs associated with the new Myer strategy.

A fully franked dividend of 2 cents a share was declared.

Detail on Myer’s results for the half year to December:

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