Myer Holdings Let Profits Slipped by 4%

Many companies didn’t start off the year well, and Myer Holdings is no different. Share prices dipped aggressively in mid-January. But since then, they’ve recovered. Myer’s still isn’t in positive territory for the year as of yet. Shares are down 8.33%. But this figure might turn around soon.

Today Myer’s released their half yearly results for FY16. Total sales were up 1.8% to $1,794.8 million. And sales growth was at its strongest, 5.6%. But Myer could convert these figures into profit.

Net profit was down 4% to $56.7 million. But even though net profits fell, it was still better than expectations of around $54 million. It seems Myer’s is ahead of schedule. And as a result their profit guidance has been increased.

Myer’s now expected full year 2016 profits to be in the range of $66 to $72 million, up from a previous range of $64 to $72 million.

Myer CEO, Richard Umbers commented on the group’s performance, stating:

Only months into the first year of our five year strategy, we are pleased with the early progress and positive customer response to initiatives delivered under the New Myer strategy, particularly in our Flagship and Premium stores.

The five year plan Umbers is talking about was updated last year in September. The key elements include:

  • Enhanced customer led offers,
  • Wonderful experiences,
  • Omni-channel shopping,
  • Productivity step change and;
  • Organisational capability.

You can tell straight away Myer’s five year plan has a lot to do with the customer. Hundreds of millions will be spent to improve the customer’s experience. Just some of the enhancements will include store layout changes, upgraded fitting rooms and a rolling out of digital hubs for Wi-Fi access.

During the second half of financial year 2016 Myer will continue to accelerate the roll out of new Myer initiatives. But will it be enough to stop shoppers from moving to cheaper online stores?

Online retailers are winning the battle

In our busy lives there’s almost no time to work, see friends and family while also spending half of your weekend at department stores. Everyone wants to look good in what they buy, and now we can get things cheaper and at the click of a button.

Online shopping makes things so easy for shoppers I almost wonder why anyone goes to the store anymore. Of course the advantage of physically shopping is the experience. You’re able to try clothes on to see if the size is right. And you don’t have to wait days or weeks for your items to come in the mail.

Plus returning an item seems much easier in store than shipping your items back to the manufacturer. But the IBM 2005 Global Smarter Consumer Study shows that more consumers than ever are actually more comfortable with online shopping.

The study surveyed 1800 Australians about their spending habits and brand loyalty. One fifth (20%) of those survey said their last purchase had been online. In 2014 this number was only 15%. The study also found that brand loyalty declined from 13% in 2014 to 10% in 2015.

It seems we increasingly don’t really care about how we get what we want, we just want it cheaper. So how will this affect Myer? They’ve already been losing sales to online retailers. But while Myer does cater to online shoppers, there needs to be a lot more money invested in line with consumers spending habits.

Härje Ronngard,

Junior Analyst, Money Morning

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