Myer brands devalued by $120m as sales slide

Department store Myer (ASX: MYR) has announced a $172.4 million loss for FY20 after a deteriorating sales environment took its toll on the brand, along with associated labels like sass & bide which it purchased for more than $70 million between 2011 and 2013.

Myer has recorded an impairment charge of $119.7 million for its brands, which came to $95.9 million after tax.

The announcement will be déjà vu, although not as severe, for Myer shareholders who saw the brand impaired by $515 million in 2018.

Total implementation costs and significant items reached $159 million, including the brand impairments, restructuring and redundancy costs, changes to the Myer one loyalty program, clearance floor closures and brand exits.

The group was forced to close all its physical stores in April and early May with around 10,000 staff stood down, although wages were propped up by $93 million in JobKeeper payments. 

Lower foot traffic in CBDs - where Myer has some of its largest stores and highest rents - prompted cost cutting across the business, reducing the number of full-time equivalent support office roles by 17 per cent and bringing inventory down by 26 per cent.

As a result the group managed to increase its net cash position by $46.6 million year-on-year, up to $7.9 million.

Widespread store closures meant total sales declined by 15.8 per cent in FY20 to $2.52 billion, although comparable store sales were down just 3.3 per cent and the group's online efforts managed to soften the pandemic's blow.

Online sales increased by 61.1 per cent for the year to $422.5 million, although more telling was the 98.8 per cent lift for the channel in the second half with particularly strong growth in beauty (+218 per cent) and homewares (+177 per cent) products.

"During the past two years, Myer has undertaken significant improvements to the website including enhancing infrastructure and peak capacity and improved search and check out functionality," says chief executive officer and managing director John King.

"Together with improved fulfilment, these enhancements have underpinned the significant growth in sales as well as a 50 basis point improvement in conversion, and an improved gross profit for the online channel."

The group has also made efforts to boost its online capacity and efficiency for customers, entering a multi-year agreement with Australia Post in August to provide warehousing and online fulfilment services.

"These new warehouse and fulfilment arrangements will underpin the next stage of growth in Myer's online business, to further strengthen the fulfilment capacity and improve efficiency, delivering benefits to Myer's customers as well as providing significant cost savings," says King.

Myer recently announced the introduction of Amazon Hub - a network of Amazon parcel pickup points that were yesterday introduced at well-established Myer Hub counters in 21 stores.

"I take this opportunity to thank all customers and team members for their support and loyalty to Myer during the past few months," says King.

"We remain focused on executing the Customer First Plan, however we have adapted it to respond to COVID-19 by accelerating, re-sequencing and expanding various initiatives. This will ensure Myer can capitalise on opportunities that exist during the post COVID-19 environment."

Updated at 12:07pm AEST on 10 September 2020.