Myer hopeful for bright summer as sales stagnate

Myer department store chief executive John King believes warmer weather and his preparations for Christmas celebrations will help arrest slowing sales growth since July.

Myer department store chief executive John King believes warmer weather and his preparations for Christmas celebrations, including large investments in in-store events and installations, will help arrest slowing sales growth since July.

A pause in interest rate hikes by the Reserve Bank, a fast-growing loyalty scheme and new brands in his stores such as Country Road and American Eagle will entice shoppers, Mr King argues, despite other macroeconomic headwinds pushing back on spending and causing uncertainty.

That uncertainty has begun to show though in Myer’s financial performance, after a very strong December half, with second-half sales growth almost grinding to a halt, fourth-quarter sales down sharply and same-store sales since the start of August down 1.9 per cent.

But Mr King, who has announced his plans to retire next year, was sounding more optimistic for the 123-year old retailer’s run into the Christmas trading period where Myer makes most of its annual profits.

Myer sales have softened since August as shoppers remain cautious about the macroeconomic outlook. Picture: NCA NewsWire / Luis Ascui

“The fourth quarter (sales drop) was the compounding of the interest rate rises. I think you could really see consumer confidence getting hurt by that and it is not just us, it was everybody across the globe.

“So for us we saw a slowdown in homewares and men’s (fashion), which had been very strong previously, and those are the two first categories that normally slow down, but over the last six weeks we’ve seen a real strong uplift in year-on-year in terms of merchandise,” Mr King said. “It’s a new season, the sun has come out, people are feeling a bit better about themselves, there hasn’t been any interest rate rises recently … and we think we are well placed to weather any storm.”

On Thursday Myer posted a strong lift in annual profit for 2023 on the back of a double-digit leap in sales, fed by its loyalty program and flagship CBD stores as well as consumers celebrating the end of pandemic lockdowns.

It recorded an 18.2 per cent leap in full-year net profit to $71.1m, in line with a trading update last month that said Myer expected to report annual earnings of between $69m and $73m, an increase of 15 to 21 per cent.

Myer said sales for the 52 weeks to July 29 were up 12.5 per cent to $3.362bn, the highest in 18 years. Group online sales of $690.5m, down 4.5 per cent, now represent 20.5 per cent of total sales.

Its CBD stores were the strongest channel, increasing 30 per cent in 2023, or 14.4 per cent on a comparable sales basis when lockdown periods are excluded from the prior year.

The retailer declared a final dividend of 1c per share, fully franked, down from 2.5c, to be paid on November 16. Total 2023 dividends were 9c per share.

Myer ended the financial year with a net cash position of $119.6m, a reduction of $66.3m compared to 2022.

However, profitability began to slow in the second half as sales growth turned negative in ­August.

Mr King said the negative sales growth was still an improvement on July, when sales fell by “high single digits”, but he added that “Christmas was around the corner” and would be strong for Myer this year.

“I think Christmas will be pulled forward this year. We think customers will be looking for those Black Friday deals for Christmas and so pulled forward into November, and the early part of December will be quite quiet.

“And then we have that last week of a rush in December.”

Despite many office workers still working from home, he expects shoppers to come in to the flagship CBD stores.

“There’s certainly more people coming back into the city. If you take Melbourne CBD, we’ve got our Myer windows, we’ve got the Santa Train, we got Santa, we’ve our Giftorium which will be bigger and better than ever,” he said.

“There’s a lot more experiences in store, particularly in Melbourne and Sydney, to drive customers back, and we’re particularly excited about this year’s windows. In fact in the last five or six years I’ve been here I am most excited about these windows.”

Myer CEO John King has posted the retailer’s highest sales since 2015 but sales growth almost ground to a halt in the second half. Picture: Stefan Postles

But for now, the “new normal” was more people in the city Tuesday, Wednesday and Thursday, and then on the weekend.

Myer’s operating gross profit growth of 6.9 per cent to $1.224bn came as margin decreased by 189 basis points to 36.4 per cent, which included the unfavourable impact of higher theft and foreign exchange movements. Cost of doing business was $824.1m or 24.5 per cent of total sales, representing an improvement of 42 basis points, year on year.

Mr King said store theft was “way worse” than it was before Covid-19, fuelled partly by organised crime.

Myer said on Thursday that theft, or shrinkage, was typically at or under 1 per cent of sales but had lifted to 1.8 per cent.

Other retailers have also pointed to higher rates of theft by both individuals and organised crime gangs.

Last month Coles said there had been a large lift in theft, with organised crime a particular problem. Gangs stole goods en masse from stores and typically tried to sell them on online marketplaces.

Meanwhile, Myer said an improved merchandise offer, continuing growth in its loyalty program “Myer One” and new partnership opportunities had bolstered its performance.

Myer One continued to underpin growth, with 720,000 new members (up 21.4 per cent) resulting in active members increasing to 4.2 million in the last 12 months.

Mr King said Myer’s multichannel offer remained a key competitive advantage, particularly against pure-play retailers.

“The synergies across the digital and physical environments are clearly evident, with our CBD locations delivering stronger results and online returning to growth in the second half,” he said.

Myer also announced its chief financial officer Nigel Chadwick would retire in early 2024. He will be succeeded by deputy CFO, Matt Jackman.

It comes as billionaire retailer Solomon Lew recently lifted his stake in Myer to 28.79 per cent, with his Premier Investments gaining a seat on the Myer board.