Shoppers spending big at Myer despite inflation

Jacob Shteyman |

Department store group Myer has announced a half-yearly 24 per cent jump in sales.
Department store group Myer has announced a half-yearly 24 per cent jump in sales.

Shoppers have been spending big at Myer, despite rising interest rates squeezing household budgets, with the department store chain announcing a significant jump in profit.

The group, which retails brands spanning fashion, cosmetics, homewares and electricals, on Thursday announced a doubling in net profit to $65 million, fuelled by $1.9 billion in sales – a 24 per cent increase in the six months to January 28.

“We are very pleased with the strength and quality of our first half results, with a best-on-record first half sales performance, significantly improved profitability and a balance sheet that continues to provide a strong foundation for future growth,” chief executive John King said.

Shareholders will receive a supersized dividend of 8 cents per share fully franked, up from 1.5 cents the previous year.

Mr King said the dividend boost, which includes a 4 cent special dividend, shows the confidence the board has in Myer’s sales momentum, despite tightening economic conditions.

Head of Australian equities at TAMIM Asset Management Ron Shamgar applauded the “strong trading result” on Twitter, adding that Myer is currently one of the best retailers in the country.

Mr King said a key factor in the positive result was success in the company’s Myer one loyalty program.

Active members in the program increased to 4.1 million, with new member acquisition up 36.1 per cent.

Myer on Monday announced a partnership with American Express, allowing Amex cardholders to contribute their loyalty points to Myer one – an arrangement already in place for Commonwealth Bank and Virgin frequent flyer programs.

CBD stores felt the strongest growth in sales, up 53.7 per cent or 20 per cent when excluding lockdowns.

While online sales declined by 9.8 per cent due to the end of COVID-19 lockdowns, they were still 31.5 per cent higher than pre-pandemic levels.

The result was not all positive, however. Group profit margin dropped 2 percentage points to 36.3 per cent due to higher shrinkage and unfavourable exchange rate movements.

A week earlier, Myer’s largest shareholder Solomon Lew’s Premier Investments consolidated its control of the company, raising its stake from 22.87 per cent to 25.79 per cent.

In January, Myer announced a 38 per cent jump in sales for the five months to December 31 compared to the previous corresponding period. At the time, it expected first half net profit to be between $61m and $66m.

Sales for the eight weeks post Christmas rose 16.1 per cent over the prior period, indicating that while consumer spending still increased, the rate of growth was slowing.

Chief Financial Officer Nigel Chadwick said that it was hard to draw any conclusions from the last two months’ data, given the previous year’s Omicron outbreak disrupting consumer spending habits, but the company remains cautious about future prospects.

The Reserve Bank on Tuesday increased interest rates by 0.25 percentage points, its 10th consecutive hike, further adding to household cost-of-living pressures.

Myer shares surged 15.7 per cent to a six-year high of $1.11 in early Thursday trading.