To reach his $1 billion online sales target, King plans to continue to improve Myer’s website and user experience, expand the range of products it offers online, speed up the delivery of online orders and better leverage the Myer One loyalty program.
In July, Myer announced it had signed a 10-year lease on a new 40,000-square-metre national distribution centre (NDC) in Victoria that will enable it to get products into stores and fulfil online orders more quickly. King called it “transformational” for the business.
“Having an NDC is incredibly important to ensure we can accommodate the growth of online, providing the service levels our customers expect from Myer whether they shop online or in-store,” he said.
The retailer also plans to relaunch its Myer One loyalty program in the next one or two years with the aim of further boosting customer engagement and increasing membership. Over 860,000 new members have joined Myer One since the start of FY19.
“The growth in online and Myer One continues to underpin the value of this business, providing us relative market scale in online and a growing competitive advantage in Myer One,” King said. “The inherent value in both these components alone sees significant upside for shareholders to come.”
CBD stores take a hit
But while online sales boomed in FY21, Myer’s in-store sales suffered from forced closures during lockdown. CBD locations were particularly hard hit, with comparable store sales down 22.3 per cent year on year.
QUT professor of marketing and consumer behaviour Gary Mortimer believes this is a sign of years to come.
“Even places like Brisbane and Adelaide [that aren’t in lockdown] haven’t seen CBD foot traffic numbers return to pre-Covid levels,” Mortimer told Inside Retail. “If we look long-term, I think many CBD-based retailers will continue to feel that strain.”
Myer has exited or announced plans to exit over 83,000 square metres of space since the beginning of FY18, and has a further 70,000 square metres of reductions in the pipeline. But much of these space reductions have been in regional and suburban stores, and Mortimer thinks Myer needs to reassess the future of its flagship stores in the CBDs, where it has been investing in refurbishments in recent years.
“If we’re going to continue to see declining traffic, do they sublease out certain floors, or reduce the footprint size?” Mortimer wondered.
“It might mean right-sizing or removing a couple of floors and investing in some of the bigger centres slightly out of the CBDs — the Chadstones, the Bondi Junctions, the Paramattas, the Carindales.”
One good result
Right-sizing the store network and growing online are two of the key pillars of King’s ‘customer first’ plan to turn around the department store, which, based on the solid growth across key metrics in FY21, appears to be working.
Myer lifted total sales 5.5 per cent to $2.7 billion in FY21, its first year-on-year increase since FY16, when sales peaked at $3.3 billion. It also posted its biggest profit since FY17, with net profit after tax excluding implementation costs and individually significant items rising to $51.7 million in FY21 from a $13.4 million loss in FY20. Statutory net profit after tax rose to $46.4 million in FY21 from a loss of $172.4 million in FY20.
The retailer received $32 million in JobKeeper wage subsidies and $18 million in rent waivers in the first half of FY21, and $1 million in rent waivers in the second half. But Myer CFO Nigel Chadwick said the retailer would have turned a profit even without this support, despite the forced store closures.
“Considering the operating environment, this is a solid result and reflects the work undertaken during the past three years to improve the fundamentals of the business,” Chadwick said on Thursday.
But Mortimer cautioned that the retailer isn’t out of the woods yet.
“I think one result is a good result, but what the market will look for and what shareholders will look for is consistent results and consistent growth over the coming years, and probably some real strong plans around what they’re going to do with these very highly exposed CBD locations,” he said.