Apple, Country Road loss costs embattled department store Myer $14 million

Two major firms moving out of the department store giant has put a dent in the embattled company’s half-year profit result.

Major brands exiting Myer continue to have a significant impact on the business after the embattled department store reported a half-year profit of $24.4 million – a decrease of 36.5 per cent on the same period last year.

Country Road abandoned the company while Myer made the decision to remove tech giant Apple from the chain’s network of stores.

This followed Nike’s snub in January last year to move most of its concessional stores off the floors from the national network.

Shoppers once relied on the major department stores to access leading brands but this continual desertion is emblematic of the deteriorating relevance of both David Jones and Myer, Queensland University of Technology retail expert Dr Gary Mortimer said.

Companies such as Apple and Nike now have their own stores or are available online, further diluting foot traffic and business in the larger retail sites.

“We will see more and more of these brands vacate these department stores and set up their own stores independently,” Dr Mortimer told news.com.au.

“This is a challenge for the department stores because they’re often very much dependent on these concession stores.”

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Myer chief executive John King said a poor sales performance from its womenswear segment – once its thriving and iconic division – also contributed to the profit loss, which amounts to more than $14 million in the six months to January 25.

“Management acknowledge the underperformance in the womenswear category and expect improvements made by the new leadership team to flow through later in the calendar year,” he said in a statement released to the share market this morning.

Myer also booked $15.2 million in costs associated with brand exits, clearance floor closures, and redundancy payouts after the company cut 35 head office staff earlier this year.

Despite the losses, the once glitzy department chain billed the profit announcement as a “solid result” as it invests in a restructure of its store network and staffing while the online sales division continued to grow, up more than 25 per cent to $168.2 million.

Myer’s womenswear division reported a poor half-year sales result. Picture: Hanna Lassen/Getty Images

“We continue to work with our landlords via a portfolio partnership approach to reduce our footprint and refurbish stores to transform the customer experience, while delivering material cost savings,” Mr King said.

A major upgrade of its central Sydney store is under way as well as refurbishments at the Cairns and Karrinyup locations. Renovations at the Belconnen store in northern Canberra will also help reduce total floorspace for the chain.

Upgrades are planned for Myer’s Albury and Ballarat stores as well.

Myer CEO John King was positive despite the drop in profit. Picture: Stefan Postles

The result comes less than two weeks after Myer’s rival David Jones yet again reported a major tumble to its profits, down more than 50 per cent to $27 million.

The South African-owned chain blamed the devastating bushfires for reducing foot traffic in its national store network while the recent coronavirus wreaked havoc on its supply chains.

Acting David Jones chief executive Ian Moir said the “sad and difficult” few months in Australia was compounded by the country’s financial struggles.

Delivering Woolworths Holdings’ half-year earnings report from South Africa, he said the Aussie “economy remains depressed”, pointing at poor wage growth, record-low interest rates and weak consumer spending.

“(These are the) toughest conditions I’ve ever seen,” Mr Moir said.

David Jones will also push ahead with its own shrinking initiative, with plans to reduce store footprint and negotiate with landlords to slash 31,000sq m of floor space by 2022.

The ongoing closures are part of its strategy of removing 20 per cent of its physical business by 2025.

“In Australia, consumer spending is likely to be muted in the short-term due to stagnant wage growth and the impact of the bushfires,” the group said in the half-year report last month.

“The heightened levels of competition and promotional activity is expected to continue.

“David Jones is expected to benefit from the completion of the Elizabeth Street store refurbishment.”

– with AAP’s Alex Druce

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