Robot warehouse logistics bungle hits Myer sales, profits

Myer was unable to sell some clothing in the lead-up to the busiest trading period of the year after some stock was trapped in the bungled roll-out of a new robot warehouse that has dealt an $8 million blow to the department store’s half-year profits.

The company had already been dealing with a two-year delay to the opening of its national distribution centre in Ravenhall, Victoria, that officially went live in August last year. Shortly after, the automated warehouse ran into implementation issues that stopped stock from reaching stores and online orders from being sent out in the lead-up to Christmas.

Clothing was trapped in a bungled Myer warehouse roll-out that has eaten a $8 million chunk out of Myer’s half-year profits.Credit: Eamon Gallagher

“A disproportionate number of our Myer exclusive brands that were at the [warehouse] and couldn’t be sold,” Myer chief executive Olivia Wirth told this masthead. “That’s now passed, we’ve worked through that stock, and that’s now sold.”

Clothing was “trapped in the [automated warehouse] requiring manual work to release,” according to Myer’s investor presentation, and stores in Victoria and Tasmania were hit particularly hard. Online orders had to be fulfilled in stores instead.

Myer chief executive Olivia Wirth at the company’s AGM in December last year.Credit: Eamon Gallagher

While the department store has identified the automation and integration issues, it is still working on a permanent solution and has incurred additional costs of $5 million. Further costs will be reported in the second half of the financial year.

Myer’s net profits for the first half of the fiscal year declined 18.5 per cent to $42.4 million. About $8 million of this was attributed to the distribution centre issues. This time last year, Myer notched $52 million in half-year profits.

Earnings before interest and tax (EBIT) declined 14.3 per cent to $102 million, with the warehouse complications responsible for $12 million in lost sales.

Myer’s share price declined sharply after trading began, but pared back losses over the course of the session to close 1.3 per cent weaker at 75 cents.

Wirth has made a number of changes at the department store since she began in the role of chief executive and executive chair in early June last year, including reshuffling the leadership ranks and restructuring internal departments.

Under her direction, the business has completed a strategic review. Wirth is looking to “rethink the apparel offering” and strengthen its online experience and beauty offerings to attract younger customers.

The company has completed its acquisition of five of Premier Investment’s brands, which are Jay Jays, Dotti, Portmans, Just Jeans and Jacqui E. Wirth is eager to integrate Myer’s loyalty program, Myer One, in the youth and women’s brands to fold new younger customers into the scheme. Myer’s loyalty members are responsible for four in five sales.

Its underperforming exclusive brands Sass & Bide, Marcs and David Lawrence are also being restructured and Myer is seeking an executive who will be responsible for the brands. Support and head office roles will be consolidated, which will result in roles relocated to Melbourne or job losses.

The sass & bide boutique at Pacific Fair that has since shut down: Myer has shut 10 Sass & Bide stores.

“We’re just working through that at the moment, so we don’t yet have a number on it,” Wirth said of the number of jobs lost.

Overall group sales were basically flat, eking out 0.8 per cent growth, affected by the closure of Brisbane and Werribee stores and 10 Sass & Bide stores.

Online sales grew 4.8 per cent, and active customers have lifted 6 per cent to 4.6 million.

The department store has also refinanced its debts and arranged a $150 million debt facility with the Commonwealth Bank and NAB.

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