Myer has announced its thirds quarter FY2017 sales results – while the department chain’s total sales were down by 3.3%, it reported strong and pleasing online sales growth of 36%.
Myer’s heavy investment in its online and omnichannel offering is certainly paying off from the looks of its Q3 sales results, which is part of its turnaround strategy.
“Over the past 18 months we have invested heavily in improving our omnichannel offer and it is pleasing to have delivered continued strong growth in online sales of 36% year to date. There has also been strong customer take-up of AfterPay since the recent launch,” said Myer’s chief executive officer and managing director, Richard Umbers.
Myer says however that total sales growth for Q3 FY2017 saw a 3.3% downturn, sales for the 13 weeks to 29 April 2017. Umbers says that challenging trading conditions such as severe weather impacts were partly to blame.
“Myer’s Q3 sales result reflects challenging trading conditions which were compounded by severe weather impacts in Queensland and Northern New South Wales associated with Cyclone Debbie,” explained Umbers.
“Despite these trading conditions we are reiterating our full year guidance provided at the first half results in March. We have remained strongly focused on driving productivity, lifting efficiency and reducing our historic dependency on discounting all of which have impacted the result.”
Myer Q3 FY2017 sales results:
- Total year to date (YTD) sales down 1.3% to $2,438 million down 0.3% on a comparable store basis
- Total Q3 sales down 3.3% to $653.0 million, down 2.0% on a comparable store basis
- Continued strong growth in online sales, up 36% YTD
- Sales per square metre on a rolling 12 months basis up 5.1% compared to July 2015
Myer closed three of its stores, two at Brookside and Orange at the start of the third quarter, and one in Wollongong in October 2016. Umbers says he’s he’s not too concerned just yet, stating he’s confident the long-term benefits of a more productive network would outweigh the short-term sales impact of the store closures.
“Myer has delivered total and comparable store sales growth in five of the past seven quarters. While sales growth is integral to the New Myer journey, at this time we are focused on higher quality sales to maximise profitability,” explains Umbers.
As outlined at 1H2017 results, Myer says fashion label sass & bide’s performance was subdued with this continuing during the past quarter, with $1.5 million of Myer’s shortfall in Q3 total sales being attributed to sass & bide.
New Myer Strategy
During the period Myer continued to invest in its wanted brands strategy by acquiring the brands, intellectual property and inventory of both Marcs and David Lawrence. “These are wanted brands being two of the most productive brands in our stores and we were delighted to secure their future,” says Umbers.
Further progress has been made in delivering a simplified business model with 36 stores now operating the workforce management system. As part of its strategy to improve productivity across all assets, a decision has been made to hand back approximately 50% of the space at its Richlands Distribution Centre in Queensland which Umbers says will significantly improve productivity of that centre. There will be implementation costs associated with this exit.
Assuming there is no return to conditions that existed around the January stocktake period, Myer continues to anticipate EBITDA growth to exceed sales growth in FY2017 and increased NPAT, (pre and post implementation costs) over FY2016.
In other news
Myer shares plummeted by 9% on Tuesday after a lacklustre report from Credit Suisse, with warnings that new US retail arrivals TK Maxx and Amazon would create significant problems for the department chain.
According to a research note from Credit Suisse analyst Grant Saligari , Myer will be forced to hasten its rate of store closures, move to a smaller trading footprint and freshen up its product mix as a result.
“The entry of TK Maxx and Amazon, Myer’s overly large store portfolio and, in the near term, a deteriorating spending environment,” were some of the challenges Myer will face according to Saligari. It may be “all too much for Myer,” he said in a report note to clients.
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