Myer’s $71.1 million profit proves retail strategy is working
Myer's turnaround strategy is paying off, but sales are tipped to slow. Photo: AAP
Myer has delivered its strongest full-year profit in years as its turnaround strategy bears fruit.
The department store chain posted a $71.1 million after-tax profit for the 2022-23 financial year on Thursday – the biggest result since 2017-18 and up 18.2 per cent on last year.
An emphasis on its Myer One loyalty program and investment in online shopping have helped the retailer, which at one point faced an uncertain future.
But outgoing chief executive John King, who has overseen Myer’s turnaround since 2018, said on Thursday that sales momentum is now slowing as consumers reduce spending.
“We are pleased with the strength and quality of our full-year result, which despite a softer trading outcome in Q4 as a result of current economic conditions, not only delivered our best full-year sales result since 2005, but also showed continued profitability,” Mr King told shareholders.
“Our multi-channel offer is a key strength of these results, as we capitalised on customers returning to stores after closures in the prior year, underpinned by our leading customer loyalty proposition.”
Turnaround based on loyalty
Investors were pleased with Myer’s full-year result and sent its stock price up slightly (0.3 per cent) by afternoon trading to 63 cents a share.
Retail Doctor Group boss Brian Walker said the result was “pleasing” for shareholders as it’s further proof shoppers have come back to the department store in recent years.
That can be seen in the growth of the Myer One loyalty program – a cornerstone of Myer’s strategy that has seen the retailer offer exclusive deals customers can’t get elsewhere.
It saw 720,000 new members in the past financial year, a 21.4 per cent increase.
There are now 4.2 million active members, and their transactions are at the highest level since the department store listed on the Australian Stock Exchange in 2009.
Mr Walker said that prioritisation of its loyalty program and investments in online shopping have allowed the department store to win back customers with exclusive ranges.
And on the supply side of the business, he added that a reduction in heavy inventory loads was a “big factor” in improving profit margins.
“Over 70 per cent of all Myer transactions across both online and offline is through the Myer One loyalty program,” Mr Walker said.
Mr King told shareholders on Thursday that new partnerships have continually been added into the loyalty program to deliver more value to customers, including the addition of American Express and Virgin’s Velocity program.
“Overall, the customer-first plan positions Myer to leverage the key strengths of our business,” he said.
“Our merchandise offer, multichannel capability, and leading loyalty program are unique strengths.”
Headwinds build
But there are some serious challenges ahead that will test the retailer’s renewed sense of life.
As Mr King said on Thursday, sales have been slowing as cost-of-living pressures weigh on shoppers, something that has also contributed to rising rates of theft across its store network.
Sales fell 1.9 per cent over the first six weeks of the new financial year, while theft rates rose 0.5 percentage points to 1.8 per cent over the past year, roughly equal to $15 million in lost stock.
Mr Walker said slowing sales reflected reduced appetite among consumers for discretionary goods, such as clothing and cosmetics.
He said Myer will find it difficult to grow its sales productivity in the current retail climate , with the last quarter’s figures pointing to challenges ahead.
“Consumers have reduced spending and shifted their focus to essentials,” Mr Walker said.