Department store Myer has suffered a slide in profit as a higher cost of doing business weighs in.
The company today posted a net profit after tax $81 million for the six months to January 25, 2014, down 8.1 per cent.
Myer flagged several points which had impacted on its results. This included increased costs related to labour and occupancy, annualised costs from the investment in new stores, store closure and refurbishment costs and operating expenses associated with growing the online business and the space optimisation project.
Total sales, however, grew by a modest 0.3 per cent for the half to $1,737 million (up 1.2 percent on a comparable stores basis). Q2 sales were up 0.2 per cent to $1,046 million (up 1.7 per cent on a comparable store sales basis).
The top performing category was once again cosmetics, despite the deflationary impact of ongoing price harmonisation, with youth, fashion accessories,women’s apparel and footwear also performing well.
Iconic Australian brand sass & bide, acquired fully by Myer during the period, continued to experience strong sales growth, according to Myer CEO Bernie Brookes.
“The full acquisition of sass & bide was completed during the half and we continue to build the design capability of the existing team as we expand the brand across additional categories and into new locations,” he said.
In addition, Myer Exclusive Brands continue to perform well, growing by 2.0 per cent and now accounting for 20.2 per cent of sales (1H FY2013: 19.8 per cent).
Concession sales grew by 1.6 per cent and now account for 15.2 per cent of sales (1H FY2013:15.0 per cent).
National Brand sales fell by 0.6 percent and now account for 64.6 percent of sales (1H FY2013: 65.1 per cent).
The best performing states were Western Australia, New South Wales and the Australian Capital Territory.
Online sales continued to grow strongly during the half and customer engagement has increased with 18.5 million visits to the website during the period.
Expansion of the online range has been a priority with an increase in stock-keeping units (SKUs) during the half to more than 100,000.
“Online sales continued to grow strongly during the half supported by improved fulfilment capability as a result of our dedicated online distribution centre which opened prior to Christmas,” Brookes said.
“We were disappointed by the outage of our website during the start of our Stocktake Sale when the site experienced performance and stability issues. We believe the issues have been resolved and the result is a more stable website that continues to trade well.
“Despite the outage, the online store experienced particularly strong sales growth during December and January including its best sales day on record and a week in which it ranked in our top 10 stores. We continue to believe we are on track for online sales to reach 10 percent of our business within five years.
“In recent years, we have invested heavily in our core systems including our warehouse, merchandise and point of sale systems and will continue to invest in building our capability to support the development of our online business.”
Overall, Brookes said good progress had once again been made executing the company’s well-established five-point plan which continues to provide clear direction for the business.
“It was encouraging to achieve total sales growth despite significant sales disruption caused by three of the top 20 stores being under major refurbishment and the closure of ourstore at Dandenong (VIC). It was also pleasing that this growth was achieved on top of strong growth in the previous corresponding period (1H FY2013)."
Commenting on Brookes' re-appointment as CEO, which was announced during the period, Myer chairman Paul McClintock said he is the right person to take the company forward.
Brookes’ reappointment to the role of Myer CEO and managing director on an ‘open term’ contract was announced in February 2014 providing continuity of leadership for Myer.
“Bernie remains passionate about Myer and its future. Our five-point plan is a product of his assessment of what our business needs to achieve its potential and he is committed to achieving that plan,” McClintock.