Myer warns of warm start to winter

AN UNSEASONABLY warm start to winter and the federal election campaign are causing headaches for Myer — but it’s not all bad news.

Myer chief executive Richard Umbers. Picture: David Geraghty/The Australian

MYER is warning that an “unseasonably warm start to winter” and the Federal Election campaign could impact its sales.

Announcing its latest results on Thursday, the retailer said sales in the third-quarter were up 2.1 per cent to $675.5 million, with comparable store sales up 3.4 per cent.

Year to date total sales were up 1.9 per cent to $2.47 billion, up 3.3 per cent on a comparable store basis. Sales per square metre were up 5.1 per cent in the quarter and 4.4 per cent year to date.

Chief executive Richard Umbers said the strong result for the three months to April 23 was a sign Myer was making progress in its five-year ‘New Myer’ transformation.

“These results build on our first half performance,” Mr Umbers said.

“We believe they further demonstrate that New Myer is moving in the right direction and that our customers are responding well to the New Myer strategy.”

Myer is reaffirming its profit guidance for the full year to be between $66 million and $72 million, excluding the impact of implementation costs of the overhaul.

The expected pre-tax implementation costs of the New Myer strategy are expected to be between $20 million and $30 million, he said.

“As previously outlined, FY2016 is a transitional year in which significant investments are being made in our future growth,” he said.

“In the second half we are accelerating the rollout of New Myer initiatives leading to increased costs and capex which includes our major refurbishment at Warringah, which is due to reopen before Christmas 2016.

“In recent weeks, the unseasonably warm start to winter has contributed to subdued sales of winter product. The 2016 Federal Election campaign occurs during a key trading period and Myer is anticipating an impact on consumer sentiment during this period but it is difficult to quantify.”

Mr Umbers said at this time, Myer “believes it is well placed to manage the business through this period of uncertainty”.

The $600 million overhaul, launched last year in a bid to combat declining sales, has seen the department store slash more than 100 brands to focus on a “narrower, more powerful range”, improve staffing levels and revamp its online offering.

Myer has posted another strong sales result as its turnaround takes hold.

Key brands now include Seed, Nine West, French Connection, Topshop, Topman, Mimco, Jack & Jones, Australian brands Aje, White Suede, Skin and Threads, TY-LR, Sass & Bide and Morrison.

“The entire Myer team remains strongly focused on delivering our strategic priorities,” Mr Umbers said.

“The momentum in the execution of New Myer is continuing with the rollout of a significant number of new and expanded wanted brands and refurbished brand destinations as well as further improvements to customer service.”

At the company’s first-half results presentation in March, Mr Umbers said the department store was “putting more of our team members in front of customers at times of greatest demand”.

The overhaul has largely been focused on 12 “flagship” Myer stores in NSW and Victoria.

Mr Umbers said those stores, which received 85 per cent of the new investment, had seen 7.1 per cent increase in same-store sales growth, a 4.4 per cent increase in average transaction value, and a 5.9 per cent increase in net promoter score in the first half of the year.

“Clearly the upshot is that there are some stores that are struggling,” he said.

In March, Myer announced that planned Myer stores in Coomera in Queensland and Tuggerah in NSW would not be going ahead, and that Brisbane’s Brookside store would close.

“We are maintaining a strong commitment to our team members, understanding the impact that decisions like this have on them,” Mr Umbers said at the time.

In September, Myer indicated that 20 per cent of its store portfolio was “not well aligned to our strategy”, with the company “canvassing the full range of productivity options” including closures.

In executive changes today, former Virgin Australia, McDonald’s and Coles marketer Michael Scott has been appointed to the newly created role of executive general manager brand and marketing.

“It is increasingly clear that the New Myer’s customer-focused strategy combined with brand and service initiatives are translating into improved performance so it is critical that we now take further steps to build on this early momentum,” Mr Umbers said.

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