Underpinned by more than $600 million investment, the five year plan will put greater focus and investment on the company’s best performing stores and most valuable customers.
Myer will raise $221 million from the capital markets to help pay for an overhaul of its department stores after a 69.7 per cent slump in full year profit.
The retailer says the fully underwritten two-for-five accelerated pro-rata non-renounceable entitlement offer will help fund a $600 million investment in total capital and implementation costs.
Myer, which had already announced it was dumping 100 brands to make way for new ones in an effort to revive flagging sales, said net profit for the 52 weeks to July 25 was down to $29.8 million from last year’s $98.5 million.
Total sales rose 1.7 per cent to $3.196 billion but Myer took a $24.5 million hit from costs associated with two store closures in Top Ryde and Hurstville, and clearing brands, as well as $11.8 million in restructuring costs and a voluntary redundancy program.
Myer CEO, Richard Umbers, argued that the results support the case “for our comprehensive agenda change” and the strategy announced today is “a significant step forward” for the department store chain.
“The board and management have taken prudent action to reset the balance sheet and add financial flexibility to the business,” Umbers said.
“The New Myer strategy is an energetic revitalisation of Australia’s best-loved retailer. It builds on our proud history and looks to the future with great optimism.
“The decisions we have taken to deliver New Myer will lead to changes to both our store network and operations, resulting in a more productive and efficient footprint.”
The strategy is a result of a review process undertaken by management over the last six months to address underlying issues facing the business.
FY16 is forecast to be a ‘transitional’ year for Myer with major investments required, therefore Myer expects to return to profit growth after FY16.
NPAT for FY16 is forecast to be in the range of $64 million to $72 million, excluding the impact of implementation costs associated with New Myer.
“We believe that the New Myer strategy is a sustainable business model that will enable us to maintain and improve our competitive position and return the business to sustainable profit growth in the coming years,” Umbers said.
Key elements of the review include:
- Re-allocating 41,000sqm of space from underperforming categories to 40 – 50 most wanted brands
- Advanced data analytics of Myer’s customer base and store catchments to build a profile of those customers and identify the greatest potential for profit
- Fine tuning merchandise offering according to store cluster
- Upgrading fitting rooms, lighting and rolling out digital hubs and wi-fi
- Introducing dwell spaces including restaurants, cafes and event spaces in priority stores
- Increasing Click & Collect as a proportion of online sales
- Improve delivery times and supply chain efficiencies
- A more productive store network with smaller footprint
Myer has formed an exclusive partnership with Topshop Topman, to become the brand’s department store partner in Australia.
The fashion brand will roll out concessions in more than 20 Myer stores from November 2015 and Myer will make a 25 per cent investment in the Australian Topshop Topman franchisee (Austradia Pty Ltd).