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Myer grows online by 41 per cent, as store sales stagnate

Online remains one of the few jewels in the rough for Myer CEO Richard Umbers, who is facing mounting scepticism over his New Myer strategy after reporting an 80 per cent decline in net-profit-after-tax (NPAT) to $11.9 million to the market on Thursday.

Underlying NPAT, excluding sizable impairments, declined 1.9 per cent, which was in line with revised guidance but ahead of market expectations.

Online sales increased by 41 per cent, a positive figure amid a 1.4 per cent total revenue decline and a 0.2 per cent comparable store sales slide for the year ended 28 July.

Omnichannel is now a $177 million business for Myer, and the success of digital and omnichannel initiatives in FY17 has bolstered management confidence in further investment over the next twelve months, with online now representing 8.2 per cent of revenue.

Umbers did not provide a target for the proportion of online sales to total sales management is shooting for, but with progress on improving sales/square metre by 20 per cent proving difficult, non-physical revenue remains a critical channel for the New Myer strategy.

Sales per square metre declined .5 per cent in FY17 and is up 3.7 per cent since New Myer kicked off two-years ago. CFO Grant Devonport conceded that figure is below expectation, with three store closures in the coming three years -part of a plan to reduce total portfolio size by 100,000sqm- set to help pick-up the pace.

“Sales per square metre is not moving as fast as we’d like, sales are flat so you have to [go] harder on the space that you are giving up,” Devonport told investors.

Online sales growth was driven by a 48 per cent increase in online SKU count, with entertainment sales increasing by 45 per cent and home sales rising 37 per cent.

Investment into ecommerce has reduced fulfilment times by 12 per cent, as next-day and same-day delivery trials begin.

But the success of online is isolated from other more problematic areas of the business, as Umbers faces questions about New Myer, following a concession that the 5-year plan will likely take longer than was originally signalled.

Umbers is nevertheless pressing ahead with his attempts to wean Myer off blanket discounting, instead refocusing the company on narrow/deep promotional activity through stocktake events and the launch of a new clearance model that will separate promotional and clearance discounting.

Under the strategy Myer is dedicating entire floors to clearance activity and is even inviting in partner brands to participate.

The appeal to customers who appear unwilling to pay-full-price after years of systemic discounting in the sector has underpinned optimism in the model, particularly for its ability to increase floorspace productivity.

“We’ll always have stock take sales, we’ll always use tactical promotions to drive the business and traffic, but it will be more based around narrow and deep rather than a whole of store blanket,” Umbers said.

“You can get people to come in by throwing money at them, but we need to drive a sustainable and profitable model for the long term.”

Hampering sales efforts are Myer’s exclusive brands, which continue to tail behind concession performance and will be a point of focus for management in FY18.

“Our concessions business continues to grow strongly, while our Myer exclusive brands have been slow to recover despite gains in some areas,” Umbers said.

“There’s a lot of ground to make up in [Myer owned brands], it’s not performing the way we want.”

Myer is progressing on 72 owned brand conversions and has launched in-store product experts for several brands in 33 stores already in an attempt to avoid further write-downs on its intellectual property following Sass & Bide’s $38.8 million impairment in July.

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