Myer impressed the market today with its half year results showing early progress in a five year plan to re-imagine the department store.
Its shares rose 12% to $1.23 as Myer posted a half year profit of $59.7 million, a 4% slide but still beating expectations of about $54 million.
CEO Richard Umbers says there’s been has been significant progress in executing initiatives across each of four priorities of the New Myer strategy.
Total sales were up 1.8% to $1.79 billion, or 3.3% on comparable store sales basis.
Just looking at flagship and premium stores — a focus of the new startegy — Myer recorded comparable store sales growth of 7.1% across 12 Victorian and New South Wales properties.
However, Myer is running behind its 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.
And the company believes it can do the transformation a bit cheaper this year than first estimated. Myer now expects full year costs to be between $20 million and $30 million, rather than $35 million to $45 million.
These are the four key priorities:
And the latest progress update:
Customer led offer
Myer has rolled out more than 500 separate new brand destinations in the last seven month across the store network including leading brands such as Seed, French Connection, Nine West and Mimco.
TOPSHOP TOPMAN has been successfully launched in six stores, with more stores scheduled.
“The brand opened in Bondi in November 2015 and has generated a positive halo effect on trading elsewhere in the store, in particular across adjacent youth businesses,” Umbers says.
Today he announced that leading men’s brand Industrie will be introduced as an anchor brand to the casual range across more than 30 stores from August. Veronika Maine is being added to the womenswear offer.
Umbers says Myer has invested to lift customer service, by prioritising flagship and premium stores, leading to well above-average sales growth.
“Store management have led a program of low cost, high impact, targeted upgrades to their stores including improved visual merchandising, lighting, fitting rooms and other works,” he says.
“Myer has prioritised the allocation of team member hours to the busiest trading periods, taking advantage of the introduction of more flexible rostering.”
The online business delivered 70% rise in revenue on the prior year with profitability growth exceeding sales growth.
“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 myer.com.au 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.”
Productivity step change
This is about getting the best out of stores. Sales per square metre of floor space is up 4.2%.
Myer announced today that it wasn’t going ahead with two planned store openings at Coomera and Tuggerah on top of a recent decision to exit the Brookside store in January next year.
“Active discussions continue with all our major property partners, on a whole of portfolio basis, relating to total occupancy costs, space productivity, lease tenure and capital investments to support growth,” says Umbers.