Release Date: March 18, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Myer Holdings Ltd (ASX:MYR) reported a 0.8% increase in comparable sales and a 4.8% rise in online sales, which now represent 22.3% of total sales.
• The company completed a strategic review and developed a comprehensive growth strategy, including the successful completion of the apparel brands transaction.
• Customer satisfaction levels improved by 100 basis points, and the Myer One loyalty program saw a 290 basis point increase in tag rate, with 453,000 new members joining.
• Operational discipline led to a 12.9% reduction in shrinkage, and the company reopened its refurbished Werribee store.
• Myer Holdings Ltd (ASX:MYR) arranged a debt refinancing expected to deliver significant savings, with $3 million realized in the second half and $11 million annually thereafter.

Negative Points

• Total sales were flat, reflecting challenging trading conditions, and EBIT was down 14.3% due to issues at the new national distribution center (NDC).
• The NDC challenges resulted in a $12 million adverse impact on EBIT, with stock trapped and online fulfillment disrupted during peak trading periods.
• Net profit after tax declined by 18.5% to $42 million, impacted by the NDC issues and higher costs of doing business.
• The apparel categories, particularly women's and children's wear, were challenged due to stock availability issues.
• The trading environment remains volatile, with mixed consumer sentiment and challenging conditions expected to persist, particularly in the apparel category.

Q & A Highlights

• Warning! GuruFocus has detected 5 Warning Signs with ASX:MYR.

Q: Can you provide more detail on what worked well in January and how it compared to February? A: January was the tail end of the peak period following Christmas and Boxing Day sales. We had major concert activities like Taylor Swift and Pink, which significantly impacted sales. There were also promotional activities and an extra day due to the leap year last year. Adjusting for these factors, we traded flat compared to the prior period, which was strong for Myer, up about 5% last year. (Olivia Wirth, Executive Chair)

Q: Regarding the SBMDL turnaround by FY26, is it primarily cost reduction, or does it require sales growth? A: The $10 million is purely cost reduction. We are restructuring the business, centralizing support functions within the Myer Group, which will reduce costs, including property expenses. (Olivia Wirth, Executive Chair)

Q: Could you clarify the cost savings from the $30 million synergy target and whether the debt refinancing savings are included? A: The $30 million synergy target includes savings from refinancing, which is an $11 million annual saving. We are focusing on Myer One expansion, e-commerce, sourcing, and refinancing. More details on the synergy breakdown will be provided at our Investor Day. (Olivia Wirth, Executive Chair)

Q: How should we think about the timing of the $5 to $10 million benefits from the NDC? A: The benefits are from cheaper online fulfillment and centralized stock allocation. We are working on remediation plans, and the timing will be clearer once we have more details on the NDC's future. (Olivia Wirth, Executive Chair)

Q: Is there an opportunity to improve the rent-to-sales ratio and margins outside of the $30 million synergy? A: Yes, there is always an opportunity to optimize our property portfolio. With the expanded Myer Group, we will focus on optimizing both Myer and apparel brands' properties. (Olivia Wirth, Executive Chair)

Q: Can you explain the variation in sales performance by state, particularly in Victoria? A: Victoria has been challenging, partly due to the NDC's impact on stock availability. The NDC plays a key role in supplying stock to Victoria and Tasmania, complicating the situation. (Olivia Wirth, Executive Chair)

Q: How are you addressing the challenges with the NDC, and what are the expected costs? A: We are working on remediation plans and expect additional costs for online fulfillment. The transition costs from operating two sites will not recur, but we are still assessing the full remediation costs. (Olivia Wirth, Executive Chair)

Q: What are the priorities for capital management given the strong net cash position? A: We will maintain a strong balance sheet, focusing on disciplined capital allocation and investments that deliver excess returns for shareholders. A detailed financial framework will be presented at our Investor Day. (Andrew Taylor, Chief Transformation Officer)

Q: How is the Myer One loyalty program performing, and what are the future plans? A: The program is performing well, with over 4.6 million active customers and a high tag rate of 79%. We plan to expand membership, drive engagement, and relaunch the program with new tiers to enhance customer value and business performance. (Olivia Wirth, Executive Chair)

Q: What is the impact of FX headwinds on gross margins, and how do you see this evolving? A: There is a $2 million impact from FX in the first half, and we expect potential headwinds in FY26 due to a stronger US dollar. (Andrew Taylor, Chief Transformation Officer)

For the complete transcript of the earnings call, please refer to the full earnings call transcript.