Annual Report 2012 67 Stores in Prime Locations
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ANNUAL REPORT 2012 67 STORES IN PRIME LOCATIONS FIRST CHOICE for fashion, cosmetics and the home CONTENTS About Myer • 02 2012 Financial Results • 04 From the Chairman • 06 From the CEO • 08 Review of Operations • 10 Sustainability • 18 Board of Directors • 22 Management Team • 24 Corporate Governance Statement • 26 Directors’ Report • 39 Remuneration Report • 44 Financial Report • 60 Auditor’s Report • 112 Shareholder Information • 115 Corporate Directory Inside back cover MYER A MYER NN U AL R EPORT 2012 EPORT Annual General Meeting The 2012 Annual General Meeting of Myer Holdings Limited will be held at Mural Hall, Level 6, Myer Melbourne, / Bourke Street Mall, Melbourne, Victoria on Friday, 7 December 2012 at 11am. 01 Myer Holdings Limited ABN 14 119 085 602 Our vertically-integrated Myer Exclusive Brand model ABOUT MYER of managing the design, development and sourcing of wanted brands provides us with significant control and flexibility. This model, together with our two sourcing Myer is Australia’s largest department store offices in Asia, our world-class supply chain, and group, synonymous with style and fashion updated IT and merchandise systems, delivers speed to market, and effective inventory control, and gives us a for over 100 years. key competitive advantage. We also seek to acquire wanted brands where it makes commercial sense and where the addition of the brand Our focus on providing inspiration to everyone includes will further strengthen our merchandise offer. our customers, our 12,500 team members, our 54,000 shareholders, our 1,200 suppliers globally and the many Improve customer service and efficiency communities that we engage with our strong brand. We have a focus on improving the customer experience Myer is a significant employer and has a long history of that incorporates a number of service and efficiency philanthropy and local community engagement. initiatives. Service initiatives include investment in The store network includes a footprint of 67 stores in high service categories at high service times, additional prime retail locations across Australia. training and selling skills programs, and enhanced The Myer merchandise offer includes 11 core product reward and recognition. categories: Womenswear; Menswear; Miss Shop (Youth); Efficiency initiatives include improving staff availability Childrenswear; Intimate apparel; Beauty, fragrance and at sales points, ensuring more efficient delivery of stock cosmetics; Homewares; Electrical goods; Toys; Footwear, to the shop floor, and reducing the level of theft and handbags and accessories; and General merchandise. fraud in our stores. Myer’s five-point strategic plan Strengthen our loyalty offer Myer’s strategy is comprised of five key elements: The MYER one loyalty program is one of Australia’s 1. Optimise our store network leading loyalty programs, with 4.7 million members and 2. Enhance our merchandise offer over 6 million cards in circulation. 3. Improve customer service and efficiency Members receive two Shopping Credits for every dollar 4. Strengthen our loyalty offer spent in Myer stores, with a $20 MYER one rewards gift card for every 2,000 Shopping Credits. On average, 5. Build a leading omni-channel offer. customers spend 3.8 times the value of their rewards card Optimise our store network on redemption. We have a strong network of 67 stores across the With the growth in loyalty programs in Australia, we country, and a strategy to optimise the store network are focused on strengthening the MYER one loyalty with a pipeline of new stores, replacement stores, program with a number of initiatives to ensure that the and refurbishments. program continues to be leading edge. We continue our focus on maximising returns per Sales using the MYER one card represent approximately square metre. 70 percent of total sales. The data from the program We recognise that our customers want to be able to provide insights into customer shopping preferences touch and feel products in store, as well as engage with and assist in the evaluation of the success of stores, knowledgeable and helpful staff. Our store network is brands, space, marketing, products and services mix. integral to delivering a seamless customer experience Build a leading omni-channel offer across all digital and retail touch points. In a rapidly changing technology environment, Enhance our merchandise offer customers’ shopping preferences continue to evolve. We have a focus on inspiring and delighting our We are focused on delivering a seamless experience customers with newness and fashionability across for our customers, whether in store, online, or on all categories. We want to be the first choice when mobile devices. The right combination of physical shopping for fashion, cosmetics and the home. stores and technology, together with the right offer and fast, efficient fulfilment is critical to our success in The Myer brand offering includes well-known national EPORT 2012 EPORT omni-channel retailing. R brands, Australian and international designers, as well as AL 57 brands which are owned and distributed exclusively We are capitalising on our strong brand, depth of offer, U by Myer, known as ‘Myer Exclusive Brands’. store network and popular loyalty program in order to NN become Australia’s leading omni-channel retailer. We increasingly integrate our marketing, balancing MYER A MYER traditional media with innovation and digital marketing / opportunities. Digital marketing and social media are now part of our everyday marketing focus on all campaigns. 02 National store network North Lakes Darwin Chermside Brookside Brisbane City Indooroopilly Carindale Mt Gravatt Cairns Loganholme Townsville Joondalup Coomera Mackay NT Pacific Fair Robina Karrinyup QLD Morley WA Perth City Maroochydore Toowoomba Carousel SA Garden City Fremantle NSW & ACT Green Hills Dubbo Tuggerah Orange Charlestown Wollongong Erina Wagga Shell Harbour Albury ACT (2 stores) Hornsby VIC Bendigo Woden Castle Hill Warringah Ballarat Penrith Chatswood Geelong Fountain Gate Macquarie Blacktown Top Ryde Parramatta Sydney City Elizabeth Launceston Bondi Tas Bankstown Hobart Roselands Liverpool Tea Tree Plaza Hurstville Eastgardens Adelaide City Plenty Valley Miranda Highpoint Northland Marion Doncaster Melbourne City Eastland Existing stores Werribee Knox City Approved new stores Chadstone Colonnades By anticipated opening* Southland 2013 2016 Dandenong 2014 2017 Frankston 2015 *Financial year VISION To be an international-class retailer providing inspiration to everyone 2012 FINANCIAL RESULTS Our key categories of Miss Shop (Youth), Womenswear, Menswear and Cosmetics all performed ahead of last year in sales and gross profit. The best performing states were Western Australia and Queensland. Full year 2012 total sales were $3,119 million. Sales in operating gross profit margin improved by 150 basis our Myer Exclusive Brands grew by over five percent points (bps) compared to FY2011. to $586 million during the year and now represent We faced significant additional costs in FY2012, including: 19 percent of the sales mix, up from 17.6 percent 1. Increased investment in customer facing hours in 2011. totalling $17 million, in addition to $9 million invested The overall strong operating gross profit result reflects during FY2011; and the success of a number of key initiatives including 2. Increased operational costs including store wages, an improved merchandise mix, an increase in Myer penalty rates and loadings, store occupancy (rents, Exclusive Brands, reduced markdowns, lower shrinkage, rates, taxes and utilities), and a full year of operating and improved sourcing, as well as the contribution of costs associated with sass & bide. sass & bide. In addition to this result there were also some one- As a result of a shift to brands focused on design, quality, off costs and gains with a negligible net profit after tax colour and innovation, we achieved an improved gross (NPAT) effect. There was a one-off gain of $16.2 million* profit margin across the Electrical category. During the relating to the renegotiation of the Adelaide store lease year, we also achieved sales growth in some Electrical and the subsequent write-back of a fixed lease rental businesses despite ongoing significant price deflation, increase provision that applied to that store. Offsetting particularly in TVs. However, the category overall this were $13.1 million* of one-off costs associated with continues to be challenging. The managed exit of white the rationalisation of our store portfolio and the full exit goods, gaming and consoles, and the rationalisation of of the CDs and DVDs category. In addition, there was a CDs, DVDs and navigation systems, impacted sales by one-off cost associated with the restructuring of the $31 million during FY2012. This was part of our longer- support office which took place in July 2012, amounting term plan to exit categories where we have limited to $3.1 million*. competitive advantage. A significant reduction in our overall markdowns Strong balance sheet was achieved in FY2012, benefiting the gross profit We maintained our disciplined focus on inventory result. While there was price deflation during the year management, and overall inventory was clean at associated with being more globally competitive, the end of the period, totalling $385.7 million, up this was offset by the success of our markdown 1.2 percent. Underlying inventory increased by reduction program. 0.5 percent to $383 million (adjusted for additional As a result of