Myer CEO John King reveals the reasons behind its record first half

Myer CEO John King told Inside Retail that the pace of growth has slowed slightly since the first half, amid rising interest rates and cost of living pressures. But he believes that the company’s impressive sales growth is set to continue as it emphasises the initiatives that underline its ‘Customer First Plan.’ They include the refurbishment of its store network, the rollout of its national distribution centre, and the relaunch of Country Road Group in July this year.

For the 26 weeks to 28 January 2023, Myer saw total sales growth of 24.2 per cent to almost $1.85 billion, while net profit after tax grew by 101.4 per cent, to $65 million. Shareholders received a four cent interim ordinary dividend per share, as well as a special dividend of four cents per share.

Meanwhile, group online sales represented just 20.3 per cent of total sales – down 9.8 per cent on the previous, corresponding period, due to the end of Covid-19 lockdowns – with its Myer One loyalty program’s active members having grown by 4.1 million over the last 12 months. 

In the eight weeks following Christmas, sales growth was up by 16.1 per cent over the same period in the previous year, which reflects Myer’s continued sales momentum despite challenging economic conditions. 

First-half sales were also up by 17.4 per cent compared to the first half of FY20, which was unaffected by Covid-19 restrictions, while its market share was up by 28 basis points compared to the six months prior.

King explained that over 73 per cent of Myer’s sales in the first half of FY23 came through the Myer One program, which is the highest share since the company was publicly listed. 

“We’ve increased the number of rewards [and] partnerships with other businesses, and it can be used online and in-store. [We] believe that loyalty programs are our currency. In times of economic hardship, people are looking to mitigate a lack of cash, and the points program is [a way to do that]” King said.

“We acquired 400,000 customers in the first six months of this year so people are wising up to it. Whether you’re [part of] a younger or older generation, it doesn’t matter. People want value, and I think this is what this program gives them. It also provides exclusivity, as part of a club.”

The strength of Myer’s loyalty program was reflected in the brand winning Loyalty Program or Campaign of the Year at Inside Retail’s Retailer Awards.

King also said that Myer’s omnichannel offering provides a distinct advantage over pureplay competitors.

“[For] pureplay [businesses], you can only shop online with those customers. You can’t physically touch the product, feel and smell it, and talk to a sales assistant. If you’re spending $3000 on a coffee machine, you want to inspect it and talk to someone about it in-store,” he said.

King added that almost two-thirds of its customers visit the website before shopping in-store, or vice versa.  

“Customers do research online then go in-store to buy Or they go in-store to have a look, and come back to buy online. Our customers have that flexibility which is a point of difference for us, [while] Myer One provides a different layer of value for the consumer,” he said.

‘It sets us apart from other retailers.”

The return of Country Road Group brands, including Country Road, Mimco, Witchery, Politix and Trenery, is set to be particularly significant for the business, given that they achieved $70 million in sales in 2019 – when they were removed from Myer stores – with a significantly smaller offer.

“We are confident with a larger, deeper offer, we will capture sales quickly, leveraging the power of our Myer One program.” 

Meeting market volatility

According to Professor Gary Mortimer, chair of the consumer research advisory committee at the Australian Retailers Association, Myer’s strong result, along with that of David Jones suggests that traditional department stores are rebounding, after struggling for about a decade. 

For Myer, he said that its results were underscored by the retailer’s significant investment in its private label ranges, as well as its concession based model. 

“When you walk into these stores, there’s not a great deal of Myer or David Jones stock on the shelves. [They] are almost a smaller version of a shopping centre [which] essentially sells retail space,” Professor Mortimer said.

“That sales momentum is being driven by those concessions.”

Mortimer believes that these big department stores aren’t as exposed to interest rate hikes as other retailers, as their core customer tends to be older, and middle-to high-income earners.

“When you start to think about customers that are aged 50 and above, they tend to not have big mortgages, or [they might have] paid those mortgages off. While [many] young families are struggling with those inflationary pressures, they’re not the target audience of Myer and David Jones,” he said.

“In saying that, if electricity, insurance and fuel prices continue to go up, that would certainly eat into older consumers’ incomes.”

Mortimer added that the closure of stores – particularly in locations where suburb demography has changed – has been a smart move for both Myer and David Jones.

“It’s no use having 70 stores, if 20 are consistently making a loss. [Sometimes] you need to shrink to grow. Shrinking your fleet can make [for] more profitable sales,” Mortimer said.

King said that Myer’s strong value proposition, and disciplined approach to cost and inventory management would enable it to withstand these pressures.

“We believe we are well placed to meet market volatility and remain focused on profitable sales growth, a disciplined management of inventory and cost, and a prudent approach to investing in a future capability and partnerships,” he said.

A game changer

Mortimer expects further refurbishments and redevelopments of Myer stores in CBD and flagship locations – as well as more investment in customer-focused services – in the future. He also wondered whether Myer might follow the lead of other retailers in expanding its pet category range.

“When we think about the types of products we buy for our pets, potentially there’s an opportunity for Myer. So we might see new categories be implemented [as a response] to macroenvironmental factors,” Mortimer said.

Meanwhile, King said that it was unlikely that Solomon Lew’s Premier Investment’s increasing stake in Myer would affect the retailer’s long-term plans.

“You’d have to ask Premier [Investments] that question to be honest, but we have a good relationship with them,” he said.

“In terms of what’s coming down the line, you’ll see store refurbishments. [We] have just started the Country Road Group rollout [and] the big one for us is the national distribution centre, which is the biggest installation of autonomous mobile robots in the Southern Hemisphere.

“It’s a game-changer for us in terms of [improving] cost-efficiency and profitability.”

The post Myer CEO John King reveals the reasons behind its record first half appeared first on Inside Retail.