Customer-first strategy turns out profitable for Myer
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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.
While total sales fell 2.8 per cent to $1.67 billion and like-for-like sales fell 2.3 per cent in the half, King told investors he was not concerned, since the company has stopped chasing sales growth for the sake of it and is focused on increasing 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.
“Operating gross profit margin improved 99bps to 38.5 per cent in the half, thanks to a renewed focus on exclusive brands.”
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.
Questions & Answers
Q.Given the drop in total sales, what is the retailer's strategy for achieving profitability?
Given the drop in total sales, what is the retailer's strategy for achieving profitability?
Myer is no longer chasing sales growth for its own sake, instead focusing on increasing store profitability and expanding its online presence. The company is also working to cut costs and improve its gross profit margin.
Q.How did Myer manage to improve its operating gross profit margin despite falling sales?
How did Myer manage to improve its operating gross profit margin despite falling sales?
The operating gross profit margin improved due to a renewed focus on exclusive brands. Myer is introducing over 20 new exclusive-to-Myer brands, many of which are international.
Q.What initiatives contributed to the reported improvement in Myer's cost of doing business?
What initiatives contributed to the reported improvement in Myer's cost of doing business?
The 1.3 per cent improvement in cost of doing business is partly attributed to the rollout of a new workforce management system. This system has enhanced the retailer's ability to roster employees more efficiently.
Q.What specific changes are planned for Myer's physical stores and online operations moving forward?
What specific changes are planned for Myer's physical stores and online operations moving forward?
Myer plans to increase its online product range, which will allow it to reduce the selling area in some stores. Fulfilment of online orders will also move from stores to a centralised distribution centre.
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