Myer ‘exits and rationalises’ electrical category to boost margins

By Claire Reilly

Myer released its half-yearly results today, posting a 1.7 per cent year-on-year decline in sales to $1.7 billion (a 3 per cent fall in like-for-like sales), as well as a 15.1 per cent drop in earnings before interest and tax (EBIT) down to $142.9 million.

Net profits after tax were down 19.8 per cent for the half year, dropping to $87.3 million. According to Myer CEO Bernie Brookes, this sharp decline was due to “one-off impacts of approximately $17 million (cycling of the receipt of the Melbourne store underpinning) and a $5 million increase in depreciation, both not repeated in 2H [the second half of the financial year].

“Our strong operating gross profit margin was driven by growth in MEBs [Myer Exclusive Brands], as well as progress in space optimisation, reducing markdowns and shrinkage, and improving product sourcing,” Brookes said.

“Our EBIT result was solid given the current trading conditions and reflects the robust business model we have established.”

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According to the company, Myer’s best performing categories were Womenswear, Childrenswear, Cosmetics and its Miss Shop youth brand. However, alongside these successes, its electrical offering continued to struggle.

“The Electrical category continued to be impacted by planned category exits and rationalisation (white goods, consoles and gaming, music, DVDs and navigation systems) impacting sales by $22 million in the first half. We are replacing this space with higher margin categories.

“Appliances and Home Office continue to perform well,” added Brookes. “The current market conditions relating to TVs, music and DVDs reflect a saturated and competitive market with significant price deflation.

“The planned rationalisation of these categories is nearing completion and we anticipate further improvements to profitability with more productive use of space,” he said.

Ever the one to stay on-top of the latest buzz-words, Brookes also announced Myer would continue to focus on its “omni-channel strategy” including the development of a Myer One smartphone app.

“Our online sales are growing rapidly and we recognise there remains significant opportunity to capitalise on the strength of the Myer brand,” he said. “Given the significant capital investment already made in supply chain and technology, we are well placed to expand our fulfilment capability as online sales grow.”

As far as good old fashioned bricks and mortar goes, Myer closed two stores in Forest Hill (VIC) and Tuggeranong (ACT) over the six months as leases expired. The company is also set to open new stores in Fountain Gate (VIC) and Townsville (QLD) “later this calendar year,” while construction has begun on a new store at Shell Harbour (NSW).

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