Setbacks for its national distribution centre (NDC) and costs related to a merger with Just Jeans and Portmans owner Apparel Brands cut profits at department store group Myer Holdings (ASX: MYR) by 42 per cent in the December half, overshadowing record performance for its loyalty program and in-store customer satisfaction scores.

Myer, which is now majority owned by Solomon Lew's Premier Investments (ASX: PMV) after the merger with its Apparel Brands business, reported a statutory net profit after tax (NPAT) of $30.4 million.

NPAT would have been higher at $42.4 million if not for costs relating to the merger and a $2.5 million strategic review, while earnings took a $12 million hit from operational issues at its NDC which went live in August last year.

Announced in FY21, the establishment of the new NDC at Ravenhall, Victoria was aimed at adding scale and lowering the cost of online order fulfilment by leveraging automated pick-and-pack technology.

However, the company experienced "implementation issues" and a delayed ramp-up of the centre, with complications causing stock flow issues, including Myer Exclusive Brand (MEB) stock remaining trapped in the facility during the September quarter. As a result, online fulfilment was transferred to stores.

In response the group needed to make contingency plans for the "all-important" Black Friday and Christmas trading periods. Even though Myer was able to put temporary measures in place, the unavailability of MEB stock alone led to a $7 million decline in EBIT, while dual site and one fulfilment costs set the group back by another $5 million.

Despite these setbacks, as well as the closures of stores in the Brisbane CBD and Weribee along with 10 standalone sass & bide stores, total sales were relatively flat year-on-year - up slightly by 0.1 per cent at $1.83 billion. Comparable sales rose by 0.8 per cent.

"We have been focused on resetting the business and positioning the Myer Group as a retail powerhouse," says Myer executive chair Olivia Wirth.

"We have concluded our strategic review and started to implement our Myer Group growth strategy with the acquisition of Apparel Brands, established our new leadership team and capabilities, arranged refinancing and commenced a restructure of sass & bide, Marcs and David Lawrence."

She says that in a year of transition Myer remains focused on executing its strategic plans to drive growth and attractive shareholder returns.

"Despite challenging trading conditions in a tough macro environment and complications experienced at our National Distribution Centre, Myer traded well throughout the all-important Black Friday and Christmas trading periods," she says.

"While consumers remain cautious, we reported growth in our comparable and online sales and I’m pleased to report our MYER one loyalty program delivered a record performance with 4.6 million active members and a 79 per cent tag rate."

This active member number represents a 6 per cent rise year-on-year, and Myer notes it has 453,000 new members of whom more than half are aged under 35.

Myer also points to strong customer engagement with a record in-store customer satisfaction score of 85 per cent, up 100 basis points year-on-year.

In 2025 to date, in March Myer recruited Super Retail Group's (ASX: SUL) chief supply chain officer to act in the same role with the group. Trading conditions have remained challenging, with sales for the first five weeks of the year down 2.6 per cent year-on-year.

"It is anticipated that the NDC challenges will continue to impact financial performance in 2H25 as a result of the remediation support," the company states.

"The SBMDL (sass & bide, Marcs and David Lawrence) restructure is underway, with related costs expected in 2H25 and annual EBIT benefit of $10 million anticipated from FY26."

The company also projects annual benefits of $5-10 million from the NDC, although realisation of these benefits will be delayed.

MYR shares were up 0.66 per cent at $0.765 in morning trading.

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