Myer’s gross profit continues to fall, down 1.4% to $1.286 billion this financial year in the department store’s annual results released this morning.
Sales were flat at $3.143 billion, up 1.2% on a like-for-like basis and Myer’s cost of doing business increased by 3.3% to $1.033 billion.
Myer chief executive Bernie Brookes said it was a “challenging year” and blamed the fall in profits on moves to reposition the business through upgrades to its store network, omni-channel strategy and focus on exclusive brands.
“As expected, our investment in the business during the year adversely affected profitability. However, we look forward to the benefits beginning to be realised in FY2015,” Brookes said in a statement.
Brookes said it was “pleasing” that Myer was able to maintain total sales despite “disruption” from four of its top 25 stores being refurbished and two stores being closed.
But David Gordon, retail expert and partner at accounting firm Lowe Lippman, told SmartCompany if you look at Myer’s like-for-like sales these refurbishments and closures are irrelevant.
“If you compare [the 1.2% increase in like-for-like sales] to David Jones and you compare it to some of the other retailers out there, it’s pretty average,” Gordon says.
Myer Exclusive Brands growth of 1.7% means the department store’s exclusive brands strategy now represents 20.3% of total sales.
Brookes said Myer is predicting continued online sales growth, and a “positive customer response” to several new brands including Alex Perry and L Lisa Ho.
Concession sales grew by 1.2% and now account for 15.6% of Myer’s sales with strong performances from existing concession brands such as Marcs, R.M. Williams, Politix, and Sunglass Hut.
Gordon told SmartCompany although concession sales have increased, these sales are not as lucrative for Myer as its exclusive brands.
“Concession sales may be up but Myer doesn’t get the same margin as company-owned sales as the concession operators take a slice of that margin,” he says.
Gordon says the increasing reliance of Myer on stocktake sales is also concerning.
“It’s reinforcing consumer behavior in terms of shopping at Myer when there is a promotion on,” he says.
Myer faces renewed competition with the purchase of rival David Jones by South African retail giant Woolworths.