Spring back in Myer’s step as recovery effort pays dividends
Myer chief executive John King is facing the year ahead with a spring in his step backed by renewed confidence around the department store’s financial performance.
Myer chief executive John King is facing the year ahead with a spring in his step backed by renewed confidence around the department store’s financial performance, reflected in the return of dividends after a five-year absence, and growing confidence among shoppers.
The market seized on the dividend payment and further proof that the slow turnaround of the retailer amid a global pandemic was beginning to show results, sending shares in Myer rocketing 28 per cent.
Mr King, the boss of the nation’s largest department store, said while he was concerned about the pressures on household budgets caused by rising inflation and higher costs at the petrol bowser, he had several levers he could pull to safeguard Myer’s positive sales momentum in the first half of 2022.
Although he believed consumers would tighten their belts over the next six months, influenced by geopolitical affairs and higher living expenses, the nation’s stored savings of $240bn would provide a cushion as people view lockdowns as being over and look forward to going to restaurants and back to the office.
“No one’s been anywhere or done anything for nearly two years, (and) savings are at an all-time high … people want to start going out,” Mr King said from Myer’s Melbourne headquarters.
“I know it’s hard to get bookings in decent restaurants in Melbourne at the moment. So people do want to go out and (take part in) all those things that were postponed, whether it was weddings or parties. So I think for us, we have a very strong value proposition, we have a clear communication plan with our customers. And you know we’re getting some momentum.”
The upbeat assessment of Myer’s strengths following store closures and waves of lockdowns has come at a key juncture for the retailer as it faces off its largest shareholder, retail billionaire Solomon Lew, who last month revealed he had built up his Myer stake to 19.88 per cent.
But on Thursday Mr King handed his board an extra weapon to fend off Mr Lew’s unwanted advances after the CEO’s his efforts to restructure the Myer chain, focus more on the customer and turn its online site into a billion-dollar revenue earner finally began to pay off.
Despite reporting a 24.7 per cent slide in Myer half-year profit to $32.3m, Mr King unveiled an interim dividend of 1.5c a share, the first dividend since 2017 and the first since Mr Lew’s Premier Investments first grabbed a stake in Myer that same year.
The news sent Myer shares more than 28 per cent higher before they closed up 10c, or 24.4 per cent, at 51c.
It has become tradition for Mr Lew to release a statement following Myer’s results attacking the company, but there was no comment on Thursday as Myer’s biggest shareholder mulls his latest strategy to sweep away the board and seize control.
But the higher share price and return of the dividend could rally other shareholders to the Myer board’s banner.
Premier Investments, the fashion empire that also owns Portmans, Just Jean, Smiggle and Peter Alexander, has seen the value of its Myer shares drop by tens of millions of dollars over the past few years, but at least with the Myer dividend it will pocket about $2.45m.
Meanwhile, Myer said sales for the 26 weeks to January 29 were up 8.5 per cent at $1.517bn, with group online sales growth of 47.5 per cent to $424.1m, representing 27.9 per cent of total sales.
The net profit of $32.3m for the December half was down 24.7 per cent on a reported basis, but an increase of 55.2 per cent if JobKeeper payments are excluded from the prior year.
“The half-year results we have announced demonstrate the strength and resilience of the business, providing continued momentum for future growth,” Mr King said.
“The combination of our online platform and store network performed well in navigating the challenges faced, including disruptions caused by government-mandated lockdowns to mid-October, the emergence of Omicron in late December, and the mitigation of major supply chain disruption and staffing availability in early 2022.
“Everyone has got their head around managing through the pandemic, so I think the threat of lockdowns has passed … I think that’s given everybody confidence.”
Mr King said inflationary pressures in the economy, led by petrol prices, had not affected Myer’s business yet, but he expected some caution from consumers this year. “I imagine we’ll see the consumer tightening their belt at some point over the next six to 12 months,” he said.
“We’ve got a lot of levers we can pull, whether it’s Myer One (loyalty program) or whether it’s online, switching between brands.”
Myer has moved to cut costs and reduce its floor space, helping to bolster its first-half performance.
Mr King said sales in the lead-up to Christmas delivered 17.1 per cent growth for the two months to January 1 over the corresponding period. “We have delivered first-half sales growth of 8.5 per cent in challenging trading conditions, with very strong growth in the lead-up to Christmas when not affected by lockdowns,” he said.
He said Myer’s online business was delivering exceptional growth, and the company was “well on the way” to its aspiration of $1bn in annual sales in the near term, and it would probably end the 2022 fiscal year with at least $700m in online sales.
“Our online business has grown nearly fourfold in the past four years and is now one of the biggest online retail businesses in the country,” Mr King said.
“In key categories, our growth is significantly outpacing competitors, both multichannel retailers and online pure plays.”
Myer said in the first five trading weeks of the second half it had seen a strong return to growth in stores and online.
Myer sales are up 15.2 per cent, with stores up 9.3 per cent and online up 48.6 per cent. “Despite the initial impact of Omicron in early January, we have returned to a growth trajectory – delivering 15.2 per cent sales growth in the first five weeks of trade in the second half across both stores and online,” Mr King said.
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