A perfect marriage: Myer is performing and DJs is for sale

Could a “marriage” between Myer and David Jones work?

Now is the time for the great Myer-David Jones department store merger – something that would have been utterly unthinkable through almost the entire period of the late Queen’s reign.

Indeed, it should be a three-way deal also involving billionaire Solomon Lew – who has been relentlessly stalking Myer and from time to time actually getting through the shop door, for well over half of the Queen’s reign.

Any merger of the two iconic brands was unthinkable through the second half of the 20th century because of their dominance in their separate individual spaces.

Myer in the great mid market of especially Edna Everage’s middle-class Melbourne; DJs in the upper echelons of both old and post-war new Sydney money, and with its takeover of Buckley’s into Toorak and Brighton as well.

Businessman Solomon Lew has been chasing control of Myer, Picture: Nicki Connolly

In the 21st century so far it would have been an awkward exercise in two dinosaurs mating, and spilling a lot of blood on the floor in the process.

Now, the numbers for the 2021-22 year and especially for the second half – the first period of semi-normal semi-post Covid trading since the Christmas half of 2019 – show that not only is there still life in the old dinosaur yet, but CEO John King has well and truly put Myer on a post-dinosaur path.

The big number was the $723m of online sales which were fully one quarter of the total sales. It was also nearly triple the $262m figure of the 2018-19 year.

Yes, “Covid did it”; or to be more exact, Chairman Dan Andrews and his lockdowns, which hit Myer particularly hard given its heavy exposure to Victoria and Melbourne in particular.

Myer chief executive John King.

Myer had to build its online dynamic and do it both fast and effectively – and it did.

Critically, the bricks and-mortar-sales have come back with the end of lockdowns and Myer now has and held an online business of scale, to sit both on top of the stores and to integrate with them.

As King was at pains to emphasise – as he has been doing for years, going back before Covid – how important the “omni-channel” dynamic was to Myer’s growth future.

But, the main game remains the stores and that is still challenging as King continues to cut into floorspace.

Here are some key numbers.

King emphasised that second-half sales were up 11.5 per cent on the pre-Covid 2019 second half.

But that was down to the spectacular online growth, with second half online up from $110m to $299m.

In-store sales actually edged down 3 per cent in the second half over the three years.

As an operational performance that was very impressive, largely explained by store closures, and especially given that “life in the city” – any Australian city but especially Melbourne – was not yet back to anything like its pre-Covid level.

South African parent company Woolworths is keen to sell David Jones. Picture: Luis Enrique Ascui

Add it all up and King has put in place a base for sustainable growth, underlined by the declaration of a fully franked dividend and a thumping $186m of net cash in the bank.

So why bother with the floundering DJs? Especially now that much of its hugely lucrative mega-margin turf has been stolen by the speciality luxury brands in Collins St, at Chadstone and similar sites in Sydney?

For two big reasons.

We are still over-shopped for department stores. We – and more particularly their shareholders – still need the two put together and up to half their stores closed.

Second is that very reality of Myer’s online success. Now is exactly the time to leverage it across the DJs customer base.

A third reason is opportunity. Myer can propose marriage from a position of strength; DJs’ South African owner Woolworths (no relation) is a desperate seller.

Maybe Lew can play marriage broker and end up, once again, in the chair.