Department store Myer has more than doubled its earnings this year, reporting a rise in net profit after tax (NPAT) to $159.7 million, up from $67.2 million in 2010.
The 2011 full year results, for the 12 months to July 31, have surpassed expectations, with the company initially forecasting NPAT would be around the $157.7 million mark.
However, earnings before interest and tax (EBIT) was down to $258.9 million from $270.9 million last year , along with sales which fell 3.8 per cent to $3,158.8 million in fiscal 2011, compared to the prior year. On a like-for-like basis, sales also dropped 5.5 per cent
Myer chief executive officer Bernie Brookes said the retailer's strong result in a tough trading environment could be attributed to the company's management team and staff. He also credited various company initiatives for the profit increase, including the Myer Exclusive Brands strategy which saw the department store extend its fashion floorspace and add over 30 new brands to its stable. Myer Exclusive Brands now accounts for 17.7 per cent of department store sales.
“To deliver an NPAT result of $162.7 million in this challenging trading environment is a credit to the strong management team and contribution of our 13,000 team members,” he said.
“In this context, I am pleased with the resilience of Myer’s performance on a number of levels. The significant capital investment that we have made since 2006 has established strong foundations that enabled us to manage our business through these difficult trading conditions.
“Our Myer Exclusive Brands strategy, improved sourcing, optimised promotional activity, and investment in CCTV to reduce shrinkage, have combined to generate an improved operating gross profit margin. In particular, our merchandise system, new point-of-sale (POS) system and a significantly improved supply chain helped us to manage our inventory during the year. We continued with our disciplined focus on costs across the business.”
According to Brookes, the standout performer during 2011 was the Miss Shop, in the Youth category, with other strong categories including women's and men's apparel, and home & cosmetics. Concessions that performed particularly well in the period included TS14+, David Lawrence and Cue.
Brookes said the purchase of a 65 per cent stake in iconic Australian designer label Sass & Bide in March, has also been a highlight for the Myer business which he expects will pay dividends in future.
“In March 2011, we purchased a 65 percent stake in Sass & Bide, one of Australia’s most successful and respected women’s fashion brands. Myer has exclusive department store rights to distribute this iconic brand and we have successfully rolled it out into 30 of our stores,” he said.
“In addition to the growth that we expect from the Sass & Bide sales in our stores, we also stand to benefit from the expansion of its standalone store network, and domestic and international wholesale businesses.”
The department store has also secured the exclusive distribution rights in Australia for the renowned UK mens formal brand T.M.Lewin. The T.M. Lewin offering, which will include shirts, suits, ties and cufflinks, and will be rolled out to 10 Myer stores from February 2012.
Looking forward, Brookes said Myer is “looking forward to the expected opening of Mackay [store] in October 2011 and Townsville in May 2012”, as well as “new stores at Fountain Gate (Victoria) and Shell Harbour (NSW) which are already under construction”. It is anticipated that these outlets will launch in 2013, with Myer will the only full-line department store across all of these locations.
Brookes also revealed Myer plans to rebuild the Hobart (Tasmania) store following the 2007 fire was announced in July 2011, and construct a replacement store at Werribee (Victoria), which will also deliver a significantly larger store by the year 2015. A refurbishment of the Carindale (Queensland) store which is also expected to commence later this month.
However, he said the retailer would also close some locations as it continues to review its business strategy and store performance.
“While we remain committed to our new store rollout strategy it is necessary to constantly review the merits of all new and existing stores, particularly as we enter lease renewal discussions. We have taken the decision not to renew the lease of the Forest Hill (Victoria) store, which will be closed in FY2012,” he said.
Further investment in online and multi-channel retailing will also continue, including "significant improvements to the myer.com.au website, including the redevelopment of our digital and online presence to deliver a new e-commerce site, MYER one personalisation, click and collect in stores, a private shopping club for our top Myer One members, and myfind.com super deals online", as well as other initiatives currently under development.
However, Brookes also said the challenging sales environment will make guidance for the coming year “very difficult” with a number of additional costs also factoring in such as store occupancy, depreciation, renegotiated Enterprise Bargaining Agreement (EBA) and penalty rates and loadings initiated by Fair Work award modernisation.
“Assuming trading conditions do not deteriorate further, we anticipate FY2012 sales to be flat and NPAT to be up to 10 percent below FY2011 of $162.7 million,” he said.
“Global and domestic economic conditions will dictate when consumer confidence returns to more normal levels. Myer is very well positioned to benefit from any improvements in discretionary retail conditions when they occur.”