Myer (ASX: MYR) closed 0.6% lower on Friday after the company reported a significant 26% drop in net profit for FY24, driven by challenging market conditions and underperformance from key brands such as Marcs and David Lawrence.
The company is now considering a strategic merger with Premier Investments’ apparel brands to strengthen its position in the retail sector.
Total sales fell by 2.9% to $3.26 billion, aligning with the company's earlier guidance. Meanwhile, the cost of doing business rose by 1.3% to $834.7 million, further straining profitability.
Profit Decline and Brand Underperformance
Myer’s net profit after tax plunged to $52.6 million, with half of the decrease attributed to the underperformance of brands including Sass & Bide, Marcs, and David Lawrence.
In response, Myer has decided to halt the sale process of these brands and is instead exploring a potential combination with Premier Investments’ apparel brands, which includes well-known labels such as Just Jeans, Portmans, and Dotti.
Executive Chair Olivia Wirth acknowledged the difficulties but remained optimistic about future prospects. “Our gross profit margin was impacted by the shift towards concessions in our sales mix. We are addressing this by focusing on growing our private label and exclusive brand portfolio,” she said.
Dividend Reduction and Strategic Update
As a result of the weaker financial performance, Myer reduced its total dividend for FY24 to 3.5 cents per share, down from 9 cents in FY23. The company also provided a strategic update, noting its decision to explore synergies with Premier Investments’ apparel brands.
“Our discussions with Premier Investments regarding a potential merger are progressing, with due diligence currently underway,” Wirth said during the earnings call. The merger would bring a range of apparel brands under Myer’s umbrella, enhancing its fashion offerings.
Online Sales and Consumer Trends
Despite the challenges, Myer’s online business continues to perform strongly, generating over $700 million in annual sales. Wirth emphasised that customers who shop both in-store and online spend 2.4 times more than those who only shop in-store.
The company also noted a shift in consumer behavior, with a younger, more fashion-conscious demographic emerging. “We are seeing a rebalance away from predominantly price-seeking customers to those who value fashion and experience,” Wirth explained.
Looking Ahead
For the first seven weeks of FY25, Myer reported a modest 0.2% increase in comparable sales year-on-year, indicating some resilience in its department store business despite ongoing macroeconomic challenges.
In addition to potential brand acquisitions, Myer is focusing on improving cost management, with CFO Matt Jackson highlighting the need for tighter control of promotional spend and inventory management.
“We see immediate opportunities for better cost control, particularly around shrinkage and inventory management,” Jackson noted.
Loyalty Program Expansion
Myer is also planning a significant revamp of its loyalty program, Myer One. Wirth outlined plans to refresh the program by expanding partnerships and elevating it into a more dynamic digital product.
“We see real potential to unlock value from Myer One by building a partnerships ecosystem and making it constantly relevant for our customers,” she said.
