Excluding the retailer’s six CBD stores, comparable sales were up 6.3 per cent year on year.
In a call with investors on Thursday morning, Myer CEO John King described the retailer’s suburban and regional stores as a “core strength” of the business and one of the reasons it is on “the right footing” to operate in the age of Covid.
Prior to Covid, King’s customer-first turnaround strategy involved reducing Myer’s store count and floor space and shifting towards a more curated offering in-store, while growing the range and improving the shopping experience online.
That remains the focus now, according to King, albeit with a revised Covid overlay.
Rise of online
Myer’s first-half online sales grew 71 per cent year on year to $287.6 million and now represent 21 per cent of total sales, roughly double what it was a year ago.
King attributed the growth of online to supply chain improvements, such as the introduction of a 3PL, which has enabled Myer to fulfil online orders faster and more efficiently, better engagement of Myer One members on digital and website upgrades over the past three years.
But while he called online the “engine room” of the business, King warned that the rate of online growth is likely to drop in the second half of FY21, since it will be cycling on the online sales boom in the second half of FY20, when Myer stores were closed for nearly two months nationwide.
Impact of Covid support
Containing costs has also been a key focus for King since he took over as CEO in 2018. The cost of doing business in the first half was down 20.9 per cent year on year to $352.2 million, thanks to $18 million in rent waivers and $51 million in JobKeeper subsidies.
“We have now delivered five consecutive halves of reduced operating costs which, combined with a significantly improved balance sheet, has ensured the company was able to withstand this challenging operating environment,” King said.
Myer ended the half with $201.1 million in net cash, up from $7.9 million at the end of FY20, and substantial headroom across all banking covenants.
Earnings before interest, tax, depreciation and amortisation were down 1.7 per cent to $214.6 million.
Net profit after tax increased by 8.4 per cent to 42.9 million, and statutory net profit after tax increased by 76.3 per cent to $43 million, reflecting $15.2 million in implementation costs and individually significant items in the prior period.
What the experts say
Queensland University of Technology professor of marketing Gary Mortimer said Myer’s first-half results have been “muddied” by the impact of Covid, rental concessions and government subsidies.
“I suspect that without such support from landlords and government, Myer would have delivered a sizable loss,” Mortimer told Inside Retail.
“There were some store closure events due to lockdowns at times throughout the year, but these were mostly restricted to Melbourne. Most capital cities, like Perth, Adelaide and Brisbane remained unaffected from July 1, 2020. Online growth was strong, but in line with other retailers reporting accelerated growth from this channel. The next half will continue to be challenging.”
Paula Bogaz, senior strategist at Retail Oasis, agreed that Myer’s online growth was “to be expected” given Covid-19’s impact on consumer behaviour.
“Based on the Australia Post Online Data, fashion retail was up 40 per cent year on year and variety retail up 27 per cent on last year. So Myer’s growth of 71 per cent in their digital sales makes sense given they had a poor offer online to begin with,” Bogaz told Inside Retail.
“In addition, they are competing against David Jones whose online offer is also really poor in terms of functionality and customer experience.”
Brian Walker, founder and CEO of The Retail Doctor consultancy, commended Myer’s online growth, but said the results indicated an overall decline in the bricks-and-mortar business.
“Their challenge is that this large legacy network of bricks-and-mortar stores requires capital replenishment, innovative retailing and is hungry for a model that attracts customers that are increasingly migrating to online or retail specialists,” Walker told Inside Retail.
Decline of the department store
Department stores around the world have struggled to adapt to the changing retail landscape, and Covid has only added to their challenges.
On Tuesday, Nordstrom reported a 20 per cent drop in Q4 revenue to US$3.65 billion, while Macy’s reported an 18.7 per cent decrease in Q4 sales.
“The two things department stores had going for them was being able to shop across different brands in one store, as well as their ‘curation’ of latest trends and brands,” said Bogaz.
But that is no longer the case.
“The internet is now the department store, we have access to product and price comparison from all retailers online, we no longer need to travel to an online store. While the curation department stores used to provide is now available to us on our Instagram and TikTok feeds. We look to our social community for what’s on trend, not Myer or DJs,” she said.