Myer Holdings Limited (MYR) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to The Myer Group Full Year Results 2026. [Operator Instructions] I would now like to hand the conference over to David Akers, General Manager, Investor Relations. Please go ahead.

Good morning, everyone. For today's briefing, we have Myer Group Executive Chair, Olivia Wirth and Group Chief Financial Officer, Kathy Karabatsas on the call. Olivia will provide a brief overview of FY '26, and Kathy will step us through the group financial results and segment results. Olivia will then provide an overview of our priorities for FY '27 and an update on trading for the first 8 weeks of the first half 2017. There will be time for questions at the end. Turning to Slide 2 and handing over to Olivia.

Thank you, David, and good morning, everyone. Today's result is in line with the update we provided in July. Despite the challenging macroeconomic conditions and volatile trading in the second half, comparable sales remained positive for the year, and the Myer Group achieved more than $4 billion in sales for the first time in its history. Operating gross profit exceeded $1.6 billion. We delivered cost of doing business in line with our FY '26 target, maintaining strong cost discipline. That is despite inflationary pressures and inclusive of our reinvestment into strategic priorities. We finished the year with a net cash position of $100 million. While the financial outcome for FY '26 is below our expectations, we remain focused on the areas within our control as we continue to execute against our strategy. Turning to Slide 3. FY '26 was a year of significant delivery across the group. We relaunched a revamped MYER one, launched our shoppable app and expanded our loyalty partnerships. We achieved another record tag rate in Myer Retail of 81.5% and in Myer Apparel Brands of 55.1%, and we increased active MYER one customers to a record $5.3 million. When we first outlined our strategy in May 2025, we highlighted our focus was on attracting a younger customer. I'm pleased to report that of the new customers that joined our loyalty ecosystem in FY '26, approximately 50% of these were under the age of 35. The addition of brands such as Fenty Beauty, TopShop and GAP is resonating strongly with younger customers, helping to attract new customers to Myer and broadening engagement within that strategically important under 35 age cohort. In product and brands, we invested in and relaunched our Myer Exclusive Brands, secured new brand partnership in womenswear, menswear and in home. Pleasingly, we are seeing more fashion and beauty brands choosing to partner with Myer because they believe in what we are doing. With our omnichannel objectives, we continue to optimize our store network. We've closed 38 Myer Apparel Brand stores and opened 14. We also commenced refurbishment of the CB Beauty Hall and Myer Morley in Perth. Our new marketplace platform is live and offering customers a wider range of products and brands. We've increased the product range by approximately 25% already with a strong uptake in home for furniture and entertainment with more to come in fashion and apparel. FY '26 marked the transition from foundation building to benefit by benefits realization with our value creation and integration initiatives beginning to deliver tangible benefits to the group. Overall, we delivered approximately $17 million of benefits from our value creation program. $20 million of synergies from Myer Apparel Brands integration. And with the Sass & Bide and David Lawrence integration now complete $10 million of benefit from FY '27. This will be increasingly important in the current macroeconomic environment and will provide a strong platform for FY '27 and beyond. And with that, I'll hand over to Kathy to take you through the group's financial performance in more detail.

Thank you, Olivia. Good morning, everyone. Turning to Slide 5. We have presented both actual and pro forma comparisons to provide a clearer view of the underlying performance of the business. Following the completion of the acquisition of Myer Apparel Brands and the associated accounting, we've restated some of the FY '25 numbers. Despite a challenging consumer environment, with increased trading volatility in the second half of the year, comparable sales for Myer Group increased by 0.7%. On an actual basis, total sales increased 11.3% with the Myer Group achieving more than $4 billion in sales for the first time. Growth was driven by online channel growth of 9.1% and concession growth of 8.2%. Operating gross profit increased 14% on an actual basis. On a pro forma basis, operating gross profit was 1.6% lower than the prior year, reflecting category mix impact and a higher level of promotional activity, in particular in the second half of the year. Cost of doing business was 2.7% higher on a pro forma basis, after strategic investments. Cost of doing business as a percentage of sales was 29.1% and in line with our FY '26 target. Underlying EBITDA increased 7.9% on an actual basis, while underlying EBIT was 7% lower on an actual basis. On a pro forma basis, EBITDA, EBIT and NPAT were lower than FY '25, reflecting softer trading conditions, ongoing inflationary cost pressures and continued execution of strategic initiatives across the group. Turning to Slide 6. This slide outlines the performance of the Myer Retail segment. Comparable sales increased 1% in FY '26, reflecting growth in women's fashion, home, kids, concessions and marketplace. Total sales increased 0.7% to $3.3 billion, broadly in line with FY '23 post-COVID peak levels and demonstrating the resilience of the Myer Retail business. MYER one tag rate reached a record 81.5%, reinforcing the strength of our customer engagement and loyalty ecosystem. Online sales also continued to grow, up 4.2%, supported by marketplace expansion and ongoing improvements to the customer experience. Operating gross profit was 1.3% lower than the prior year, with gross margin impacted by category mix and a higher promotional activity across the market in the second half. As illustrated in the brand mix bridge, growth in concessions helped offset lower sales in national brands and Myer exclusive brands. The segment result was 3.5% lower than FY '25 and reflecting the lower operating gross profit outcome. Overall, Myer Retail delivered positive comparable sales growth, continued growth in online sales and a record Myer on TAG rate. Turning to Slide 7. This slide outlines the performance of Myer Apparel Brands on a pro forma basis. Comparable sales were 0.3% lower than the prior year, reflecting strong growth in Just Jeans and stabilization of performance in Dotti. This was offset by softer performance across the remainder of the portfolio, particularly in Portland. Just Jeans continues to perform particularly well, with sales increasing 6% during the year and now representing approximately 40% of Myer Apparel Brand sales. The performance of Just Jeans reflects the progress being made through initiatives, including range simplification, the investment in new format Just Jeans stores and improved operating disciplines. We are applying these learnings more broadly across to Myer Apparel Brands portfolio. Operating gross profit was 1.3% lower than the prior year, with margin impacted by promotional activity and the broader trading environment. As a result, segment performance was 3.5% lower than pro forma FY '25. A key achievement during FY '26 was the rollout of MYER one across the portfolio with a tag rate reaching 55.1% only 12 months after launch. This provides us with a stronger customer data set and supports more targeted customer engagement across each brand. The integration of Myer Apparel Brands continues to progress well with further opportunities to improve performance through customer insights, operational efficiencies and group-wide capabilities. Turning to Slide 8. This slide bridges cost of doing business from FY '25 to FY '26. Cost of doing business as a percentage of sales was in line with our FY '26 target at 29.1%, inclusive of underlying inflation and the investment in key strategic initiatives throughout the year. Cost pressures across Myer Group were offset by $42 million of value creation and integration synergy benefits at the CODB line. The FY '26 value creation program delivered $14 million of benefit with combined integration synergies across Sass & Bide, Marcs, David Lawrence and Myer Apparel Brands delivering $28 million of benefits. Turning to Slide 9. This shows our cash flow. Operating cash flow increased $9.9 million in FY '26, driven by an increase in EBITDA with the inclusion of Myer Apparel Brands, offset by working capital movements due to increased receivables, prepayments and payables for operating activities. Capital expenditure was lower due to timing of investment in store renewals and the national distribution center. Free cash flow was higher reflecting higher operating cash flow and lower CapEx. Net cash outflow was $23.7 million lower than the prior year, reflecting higher free cash flow and no additional repayment of borrowings. This was offset by a significant increase in the principal portion of lease liabilities due to the inclusion of Myer Apparel brands leases in the FY '26 year. Turning to Slide 10. This summarizes the Myer Group balance sheet. At year-end, the group had a net cash position of $100 million with inventory broadly in line with prior year. Lease liabilities decreased, reflecting higher cash lease payments, partly offset by the new Myer Group support office lease, my retail lease modifications and CPI increases. Intangibles decreased following the impairment charges against brands and goodwill. At year-end, Myer Group debt facilities totaled $150 million. Total facilities available to the group subsequent to year-end totaled $200 million, having increased our facilities with 1 of our banks to $100 million and extending the maturity date of the facility from FY '28 to FY '30. And with that, I'll hand back to Olivia.

Thanks, Kathy. I'll now provide an update on our priorities for FY '27 and trading for the first 8 weeks of the year. Turning to Slide 12. The Myer Group growth strategy remains unchanged, and we continue to believe it is the right strategy to create long-term shareholder value. At the same time, the operating environment has become increasingly challenging, with significant macroeconomic pressures impacting consumers. Our customers are experiencing ongoing cost-of-living pressures, and there is a heightened consumer uncertainty and rapid changes in technology, reshaping the retail landscape. In response, while remaining committed to our growth agenda, we are increasing our focus on the initiatives within our control that can enhance productivity, simplify the business, improve customer outcomes and accelerate value creation. Therefore, our focus for FY '27 is twofold: disciplined execution of the growth strategy and accelerating the delivery of value creation initiatives across the group. Turning to Slide 13. Our strategic priorities for FY '27 reflects both consistency and agility. The growth strategy remains unchanged. However, we are adapting our execution priorities to reflect the current consumer environment and the pace of change occurring across retail. While some growth initiatives may take longer to realize their full potential in the current macroeconomic environment, we remain committed to investing in the capabilities that will support sustainable long-term growth. We're increasing our focus on value creation initiatives that can improve productivity, simplify operations and deliver benefits in the near term. This includes leveraging technology and AI opportunities, accelerating integration benefits optimizing our operating model and maintaining a disciplined approach to costs. The second half of FY '26 demonstrated that many of the initiatives underway are beginning to translate into operational and cost benefits. Key priorities for FY '27 also include further enhancing our MYER one and customer engagement, expanding our products and brand portfolio, progressing network optimization and strategic store renewals, advancing our sourcing and supply chain initiatives. We remain focused on simplification and capturing additional benefits from our value creation program to help manage costs during business, while continuing to realize additional integration synergies from Myer Apparel Brands. Turning to Slide 14. Trading in the first 8 weeks of FY '27 has remained challenging, reflecting continued cost-of-living pressures and subdued consumer confidence, which continued to impact customer spending patterns. We've also seen some recent challenges in global shipping. While trading was softer through August, we have seen improved momentum through September, including across Father's Day trading period, providing encouragement as we approach the important peak trading season. Overall, comparable sales for Myer Group were flat, while total sales were 2.7% lower versus prior corresponding period. For Myer Retail, comparable sales were 1.8% higher, and for Myer Apparel Brands comparable sales of 5.9% lower. Consistent with the priorities outlined today, our focus remains on the areas within our control. We're accelerating value creation initiatives, integration benefits, productivity improvements and disciplined cost management while continuing to invest in the capabilities that underpin our long-term growth strategy. Looking ahead, we anticipate trading conditions and consumer behavior will remain volatile over the next 12 months. However, the strategy remains unchanged. Our priorities are clear and we remain focused on disciplined execution, value creation and delivering improved outcomes for our shareholders. And with that, I'll hand back to David for questions.

Thanks, Olivia. We'll now take your questions. Ash, if you can please open up the line for our first question.

[Operator Instructions] First question today comes from Garth Francis with MST Marquee.

Just on the sales trading update, appreciate that there'll be some impact from the beauty closures and the WA closure. Is that -- does that fully explain the delta between the comp sales growth and the total sales growth for Myer retail?

Yes. So yes, correct,. So comparable sales takes into account the fact that we are investing in Sydney Beauty in the Beauty Hall and the more lead disruption as well. And Roseland.

And those should all be completed? And are there any other revamps that are planned for the rest of '27?

So we're aiming to have Sydney Beauty completed by peak this year. Myer will reopen in the next few weeks, and Roselands will close at the end of January. There are no other store disruptions that we are planning in the second half at this stage.

And then just in terms of the comment on freight, maybe if you could also just touch on the currency as well. So my understanding is that the hedge book means that the changes in Aussie dollar are only going to be a benefit, but potentially late second half or first half of '28? And then the call out on freight, this is sort of just wound up in the gross margin expectations. It's just -- how are you handling that? And have there been any disruptions related to the types and weather that may impact your either Christmas sales or late in '27?

Yes. So just on FX and hedging, yes, we will see a benefit in the second half based on our hedge book, you'll correct their gas. And as it relates to freight, we have seen delays in some cases, 2 to 3-week delays given the global challenges that we face from a trade perspective and typhoons in particular, in the last few weeks have really impacted our ability to bring in our some stock. That is coming in now, but it is slower than we would like.

The only thing I'd add, Garth, is that obviously, we prioritized Christmas trim. And so Christmas was already here. We opened Christmas next week in Melbourne for example, so we've prioritized Christmas. But as Kathy mentioned, there's particularly some summer fashion that has been delayed due to weather conditions.

And then just if I may, 1 more. Just the promotional environment called out specifically in the second half. Is that specific to a particular category? Or is that across Myer's offer? And I mean, how is the started appreciate that after into financial year sales is a short period of time. But if you could just also highlight whether that there's been any change in that.

I mean, I think you'll see that it's across the market. As market wide. You all have heard other retailers talk about the promotional cadence and the depth of promotion that we've seen in the second half. We talked about that in our July update, and it's across all sectors of retail, and we're seeing that across the board. Obviously, the mid-season and endorses on clearance, which are underway at the moment, and then we'll obviously go into our peak trade period in Black Friday. We do expect that, that will come earlier again this year, but we're ready to trade as best we can during that period, and that provides a unique opportunity for us to make sure that we capture those Christmas gifting opportunities, particularly in Myer because we believe that will be early again this year. So yes, the depth of promotion continues, and we saw that in the second half, and we expect that will continue for the foreseeable future.

An improvement on gross margins feels quite difficult at this point.

Well, yes and no, we are working through that, Gath. And yes, promotional activity does impact, as you know, gross margin. So yes, it will take some time. Then obviously, for us and where we focus has been as well, Garth, we do, particularly from a Myer retail perspective, there is a focus on our private label businesses. We saw strong performance in Home and Kids, for example, in FY '26. That's obviously at a higher margin. We've relaunched our Myer Exclusive Brands or private label brands from a women's and fashion-enhancing perspective, that's early days. But that's obviously an important part for us going forward in Apparel Brand business, obviously, also a focus on making sure that we can maintain margin as best we can. So we're alive to it. And making sure that the promotions are managed accordingly with a focus on margin over the medium to longer term.

Yes. And the only other thing I would just add to that, Garth, is we have seen improvement in our Cana Brands business in our gross margin rate, maybe at the expense of sales, but we are improving gross profit margins there. We're very happy and pleased with how that is going from a gross margin perspective.

Your next question comes from Julia Duster with Morgan Stanley.

Just firstly, just back on the trading update, wondering if you could just give me a bit more commentary on what you're seeing through September? Was that entirely driven by Father's Day and kind of consumers coming in for events? I guess any more detail you can give on how you're seeing the consumer evolve from August through September and what kind of you can pin that improvement down to?

I mean, overall, again, just to set the thing that there is some volatility, and we outlined this particularly in our July update because we actually saw significant changes month-on-month. And -- it's just to point out that, that continues. And we do expect that volatility to continue. So there was continued softness in August. But from a Myer Retail perspective, what you see is from Myer retail, we do perform well during gifting seasons -- we are synonymous with gifting and where there was a purpose and a reason for the customer to shop in the lead up to Father's Day, we saw some momentum in sales during that period of time. It was the second biggest Father's Day period for Myer. So that shows you that when there's a reason for shopping as there was for gifting during Father's Day across multiple PPCs, whether that be fragrance to men, whether that be color shirt or Father's Day, we performed well during that period.

And we had a good start to mid-season.

Yes. start to mid-season sale and obviously taking those learnings to how we make sure we can best perform during the next gifting season, which is Christmas and obviously a peak period for us.

Got it. And then maybe just 1 more question on apparel brands. Just in terms of the non Jos Jeans brands, are you at the point yet with kind of having loyalty for enough time and add enough penetration to be able to understand what you need to do in those businesses from kind of a product perspective or a store network perspective?

Yes. So we're looking at a broader data set than just MYER one. So obviously, we've rolled that out. That's been about 12 months. We're seeing about 55% tag rate. So yes, the answer is we far better informed on who the customer is today and how we're seeing the customer, I guess, behave across the 5 brands and more broadly within the Myer ecosystem. We also did undertook work to better understand the broader market. So looking at the customer, looking at competitive brands, understanding who is performing well in this market. So we have a whole of market view from a fashion business perspective. The things do take time. Obviously, we've started to see some great improvements in just tens Kathy spoke to in the results about the improvement that we saw in the second half with -- do -- and these are being informed by the data that we're getting. And importantly, we're also seeing very high tag rate in Jackie and Portland, but it will take some time to, in particular, for Portman's to turn that business around. Matt, the core maker has joined as the CEO of Power Brands. There is a plan in place. We will now taking immediate actions to try to turn that -- improve that Portman's business. And will just take time. That will take 6 to 12 months in the very least to see that turnaround, but we're confident in that, and we're much better informed to do so given the data set that we now have, and we're very clear on the customer of today and who the customer for tomorrow should be.

Your next question comes from Sam Haddad with Petra Capital.