Myer's online store on track to break-even this year

Despite reporting that its net profit after tax dropped 8.1 percent to AU$89 million and EBIT is down 10.5 percent to AU$127 million for the first half of the year ended January 25, 2014, Myer said its online business is on track to break even during the 2014 year.

The company reported that total half-year sales for 1H14 were up 0.3 percent to AU$1,737 million from AU$1,732 million.

Myer CEO Bernie Brookes said its online sales continued to grow strongly during the half year, mainly supported by improved fulfilment capabilities as a result of opening a dedicated online distribution centre in October, which currently houses the company's top 13,000 SKUs.

"Efficient fulfilment of orders is key to the profitability of our online store," he said.

"We are delighted with the performance of our dedicated online fulfilment centre, which has assisted in driving down the cost of order fulfilment by 28 percent compared with the prior year."

The retail giant also noted that the main channel that customers accessed the Myer online store through was mobile, either via a tablet or smartphone. As a result, sales through mobile devices were up by more than 140 percent for the half, and by almost 390 percent in January compared with the prior year.

The company believes an improvement to the online store's navigation and menus in November 2013, together with the expansion of its online range to more than 100,000 SKUs, helped sustain an improvement in online conversion rates and eventually helped drive 18.5 million visits to the store during the period.

However, at the start of the company's post-Christmas sales period, the Myer website did crash, and remained down for an extended period of time. IBM, the retailer's IT operations provider, blamed the meltdown on "communication breakdown" between internet servers and a software application.

"We were disappointed by the outage of our website during the start of our Stocktake Sale, when the site experienced performance and stability issues. We believe the issues have been resolved, and the result is a more stable website that continues to trade well," Brookes said.

"Despite the outage, the online store experienced particularly strong sales growth during December and January, including the best sales day on record and a week in which it ranked in our top 10 stores."

Brookes said the company is targeting for its online sales to make up 10 percent of its business within the next five years. This is a similar target that rival and potential merge partner David Jones announced yesterday during its 1H14 results, where it reported that its total online sales were up 220 percent on the corresponding period in the prior year.

During the half year, Myer also remained focused on the progress of its five-point plan. For instance, it launched a national digital customer service feedback program called FeedbackASAP that saw a total of 21,000 customer interactions since the launch. It provides the company with a benchmarking tool to assess its service by store, team member, and merchandise category on a daily basis.

Brookes said it also introduced an online booking service for school shoe fittings and Santa visits, with hopes to roll out online bookings for other services during the second half of the year.

He also acknowledged the importance of customer service with the belief that the data obtained through its Myer One loyalty program will continue to help the company evaluate key aspects of the business, including stores, brands, space, product, service, and marketing.

"We continue to focus on customer engagement and retention by acknowledging and rewarding our most valuable members, as well as targeting customers with relevant offers," Brookes said.

In a continued aim to improve service in-store, the company said it will roll out a pilot program during 2H14, where team members will be equipped with iPads to help enhance customer service.

Looking forward, Brookes believes the company's investment in the five-point plan will help continue to drive sales and profitability.

"We continue to believe online sales will double in FY2014 over FY2013, and that the online sales business will reach break-even during the 2014 year," the company reported.

"Ongoing investment in omni channel is driving continued growth in online sales, supported by our new online fulfilment centre in Melbourne and our new management system."