Myer’s Bernie Brookes is pinning his downgraded hopes on Myer’s mid-year stocktake sale, which traditionally generates most of its second half earnings. Last year’s sale was disappointing, with fourth-quarter sales 5.8% lower than the same quarter of the previous year. Brookes hopes that changes Myer has made to its offer this year will produce a better outcome.
While the torrid external environment is buffeting all retailers, but department stores in particular, there is also a structural element to the pressures on traditional retailers. Online sales, while still only a little more than 5% of total retail sales, are growing at 20%-plus annual rates and the big traditional retailers have been slow to respond.
Myer is slightly more advanced than some of its peers and, with its massive Myer One loyalty program – which has more than four million members who account for a majority of its sales – has a base to leverage into an online channel as part of a “bricks and clicks” strategy.
Brookes has said previously he believes Myer could eventually generate 7-8% of its sales – currently around the $3 billion a year mark – online. There are department store operators offshore who are doing double that rate and more.
A key to traditional retailers being successful online is to own or have exclusive control of key brands. Myer has been doing both, buying brands like sass & bide and Trent Nathan and, more recently, the womenswear label Grab. Brookes is on the lookout for more. Ownership and exclusivity enable some control over pricing and the ability to avoid channel conflict.
While it is off a very modest base, Myer would be encouraged by the early signs of success from its continuing heavy investment in its online platform and the IT platform and processes that support it. Brookes said today that online sales were continuing to grow and were more than 200% above their level last year.
He’d also be mildly encouraged that trading in the recently refurbished Carindale store in Queensland is showing positive results. Myer’s Highpoint store in Victoria is about to experience a similar overhaul and it has two new stores, at Fountain Gate in Victoria and Townsville in Queensland, that will open soon to provide another boost to sales.
Without a major change in consumer sentiment and household spending on discretionary items, however, the context in which the big retailers are operating and the fierce and margin-compressing competition for the available sales that it has ignited is unlikely to improve significantly. There’s not much in prospect that suggests that change in context is likely to occur anytime soon.
This article first appeared on Business Spectator.
