Look out Mark McInnes - there just might be another store like David Jones coming up behind you.
On the face of it, Bernie Brookes and the Myer team have produced a commendable outcome in a very depressed sales environment - managing to both slice costs and fatten profit margins.
Brookes has some of the luxury of being a private company, although his owners have been careful to make sure Myer keeps results fairly open because private equity group TPG wants a return on the $1.4 billion it paid for the retailer back in 2006. There will not be a re-float until at least next year, given general conditions and the fact Brookes still has more than a year to goof his 50-month turnaround strategy, but TPG knows the benefits of a market continuing to be well-informed of progress.
A week ago, David Jones chief executive McInnes boasted that his upmarket department store operation was probably better placed than any of its competitors around the world to weather the economic slump.
McInnes last week reported a 6.4% drop in sales to $1.06 billion for the December half year, while Brookes' Myer was down 3.7% (it budgeted for a 5% fall) at $1.76 billion. It is worth noting, too, that Myer singled out trading conditions in Victoria as tougher than any other state.
At the gross profit line, David Jones earned $419 million, or a 39.5% return on sales, while Myer reported $715 million, or a 40.6% return. Drop down to the earnings before interest and tax line, and McInnes edges ahead with $134 million of profit, or 12.6%, while Brookes made $161 million, or 9.2%.
David Jones' EBIT is not quite as flash if you strip out the financial services business, falling back to 10.8% - but still a healthy break on Myer.
Of course, to widen your profit margins there have to be some losers. Brookes said the gains had been through "more efficient labour management" - code for using fewer staff, better. Myer did make 100 staff redundant, and even though that is only 1% of its headcount, it is 100% of the headcount for each person without a job.
Myer said the outcome also reflected better buying and supply terms, which means it has - like fellow retailers - been tightening the screws on the suppliers of its goods. That it could do that at a time when the Australian dollar has fallen, which would raise the cost of its imported goods, shows how fierce the tug-of-war behind the shopfront has become.
On the import front, when Myer was bought out of the stuttering Coles Myer group it took 42 days - that is a month-and-a-half - to bring in goods from China. It is now down to just over three weeks, which brings with it all sorts of gains.
Have consumers had to pay more to get the Myer outcome? In some circumstances, yes - and part of that will have been the currency effect forcing some prices higher. Myer did say that it had exercised "better markdown control", which meant it was more closely supervising the pricing and amount of sale stock. As a shopper, you may not have been hit with a price rise, but the discounts offered will have been more selective, and not so deep, even though there may have been more sale events - and anyone who shopped in the months before Christmas knows retailers deluged shoppers with enticements.
imcilwraith@theage.com.au
The Age
