Thank you for standing by. Good morning. Welcome to the analyst and investor call for Myer's twenty twenty-four full year results with Myer's Executive Chair, Olivia Wirth, and Chief Financial Officer, Matt Jackman. All participants are on a listen-only mode. There will be a presentation followed by a question-and-answer session for analysts and investors. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I'll now hand the call over to Olivia.
Good morning, everyone, and thank you for joining us this morning. Before we commence, I wanted to recognize the various traditional lands on which we operate our business today, as well as acknowledge their elders, past, present, and emerging. For those of you who don't know me, I'm Olivia Wirth, and I was appointed Executive Chair of Myer in March, with executive responsibility taking effect in June. I'll start today's presentation with an overview of the twenty twenty-four financial year from both a financial performance and operational business perspective. I'll then hand over to Matt, our CFO, who will go through the financials in more detail before I provide an overview of some initial strategic objectives of the business and the opportunities ahead, as well as outline the next steps of the strategic review, which is currently underway.
There will be an opportunity to ask questions at the end of the formal presentation. So let's start on slide four, for those of you who are following along the presentation that we lodged for the ASX this morning with the financial overview. As we noted at the time of our trading update in early August, Myer has not been immune from the challenging macroeconomic conditions and inflationary pressures confronting the Australian retail sector during FY 2024. Our total sales for the year were down 2.9% on FY 2023, at AUD 3.266 billion, reflecting the tough consumer environment, as well as the impact of the closure of our Brisbane, Frankston, and Werribee stores for all or part of the year. Our total sales...
Sorry, pleasingly, despite these conditions, our group comparable store sales increased by 0.4% for the year, with the trajectory improving half on half. Our first half FY 2024 comparable sales were up by 0.1% versus the same period in FY 2023 and continued to improve in the second half, with comparable sales growing by 0.8%. Our online sales also continued to grow and were up 2% on the prior year at AUD 704 million, constituting 21.6% of our total sales. Net profit after tax for the year was down 26% at AUD 52.6 million.
As we indicated in our August trading update, approximately half of this decline was attributable to the underperformance of three Myer specialty brands: Sass & Bide, Marcs, and David Lawrence, with the remainder reflecting the combination of lower total sales from store closures and inflationary pressures. Throughout this challenging period, we've maintained a robust balance sheet and generated strong cash flow. Our net cash flow for the year was an outflow of AUD 3.7 million, an improvement of 60 million on FY 2023, and net cash was down AUD 6 million at AUD 114 million. And today, we have now announced a AUD 0.005 per share, fully franked dividend, which is in addition to the interim AUD 0.03 per share paid in May. This has resulted in a total full-year AUD 0.035 per share, fully franked dividend. Now moving to Slide five.
If we turn now to our FY twenty-four business overview, importantly to note, our in-store experience satisfaction levels for the period were up two hundred and ten basis points to 85%. This is our highest rating on record. We continue to invest in the tools supporting our frontline staff. Notably, we completed the rollout of our new point-of-sale software, which provides real-time transaction details for customers and improved transaction speed, as well as the expansion of our M-Metrics app to our brand partners. The M-Metrics app has been a significant resource for our frontline team members, giving them access to product and promotional information, performance analytics, and verbatim customer feedback. It means everyone on the shop floor now has this data in the palm of their hand.
Team member safety continues to be a priority for us as we continue to work on implementing initiatives to enhance the working environment. During the year, we undertook trials, for example, on body cameras and invested in new Myer security guards. From a customer loyalty perspective, we also achieved another record year for Myer One. This is the highest since the inception of the program in 2004. We now have 4.4 million active Myer One members. That's those who have spent in the last 12 months, and a tag rate of 77.2% of our sales using their Myer One card. This provides us with significant access to data to inform and improve our customer engagement and lifecycle value. Importantly, we attracted 706,000 new Myer One members during the year, with more than half under the age of 35.
This demonstrates that we do have the ability to continue to attract a younger demographic... We'll talk more about the enormous potential we see in leveraging this competitive strength later in the presentation. We now turn to slide 6. From an online perspective, we've already referenced growth for the full year of 2%. However, it's worth noting that this growth was much stronger from a bottom line perspective, contributing to a 9% improvement in profitability as we continue to improve the effectiveness and efficiency of this channel. Throughout FY 2024, we continued to invest in our omni-channel capability by bolstering our online security with the introduction of a multi-factor authentication and by growing our partner and financial services ecosystem. We will also strengthen our fulfillment experience with the introduction of metro-to-metro services, increasing speed to customers.
We'll continue with our plans to increase capacity and capability with our updated regional distribution center in Wacol, Queensland, and our new national distribution center here in Melbourne. I should note, however, that while both DCs are running, they are not fully operational, and we expect that it will take considerably longer than originally envisioned to fully ramp up the capability and automation of these sites. We anticipate that we will see benefits from these DCs starting to flow post the Christmas period, which is over a longer timeframe as we progressively scale up operations. From a merchandise perspective, we'll continue to focus on driving momentum in big brands and delivering a balanced offer. Tight inventory management remained a key focus, and it was pleasing to see the reduction in our clearance inventory from 8% of total inventory in FY 2023 to 7.7% in FY 2024.
Moving to slide seven. Another area of focus during the year has been on delivering productivity improvements through the optimization of space. Key changes in the period relate to the exit of our Brisbane and Frankston stores, as we previously stated. We are continuing to look for an alternative location for the Brisbane CBD store. Four store refurbishments were completed during the year: Chermside, Marion, Tea Tree Plaza, and Ballarat, with further store improvements underway in FY 2024-25 at our Bondi Junction Beauty Hall and our Northland and Doncaster stores in Melbourne. As I mentioned earlier, our business has not been immune to inflationary pressures, and we are focused on disciplined cost management to mitigate the impact, together with other initiatives such as tighter management of shrinkage expense, which decreased by 3.3% in FY 2024. Let's now move to slide eight.
Before I hand over to Matt, I wanted to take the opportunity to talk through the financials, where Matt will talk through financials in detail. I just wanted to touch on Sass & Bide, Marcs and David Lawrence. When I took on the role as Executive Chair in March, we commenced a comprehensive strategic review to increase Myer's profitability and drive sustainable earnings growth. Our objective is to identify opportunities to deliver a step change in Myer's market position and generate substantial strategic and financial benefits. The preliminary phase of our review reinforced the importance and potential of growing our exclusive and private label brands to improve margins and differentiate our offering to our customers.
As a result, in June, we announced that we've made the decision to cease the sale of Sass & Bide, Marcs, and David Lawrence, and to retain these brands with the view to leveraging the equity in these well-known and loved brands by resetting and refocusing them. While I noted at the start of the presentation that approximately half of the decline in NPAT in FY 2024 was due to the underperformance of these three Myer specialty brands, it is also important to remember that prior to FY 2024, the combined Sass & Bide, Marcs, and David Lawrence brands had a track record of positive earnings contribution. In FY 2024, there are a combination of reasons for their underperformance, including the disruption of the sale process, macroeconomic challenging trading conditions, and relocation of floor space in our department stores. We are taking immediate steps.
This will improve the performance trajectory of these brands. On the third of September, we confirmed that Sass & Bide would be reset as a concession and online model, and that we are closing ten of fourteen standalone retail stores in the first half of 2025. We also said that we'll be restructuring Sass & Bide's support operations to remove duplication with the Myer group functions, and we'll begin operating new Sass & Bide concession pads within our Myer stores in the Q1 of 2025. We are working on expanding their footprint and visibility within Myer stores, and importantly, on leveraging the Myer One loyalty program and our omni-channel offering to further promote and grow these brands. I now hand over to Matt.
Thanks, Olivia, and good morning, everyone. The trends in the full year 2024 result ended up being very similar to what we recorded in the first half period. In summary, we believe it is a solid result, particularly in our department stores business, considering the continuation of the challenging trading environment, the effect of inflation on our cost base, and the impact of store closures, including our Brisbane CBD store. As I've touched on previously, achieving comparable sales growth in the current environment, and when comparing to the very strong sales performance in FY 2023, demonstrates the strong foundations our business has as we move forward to focus on growth. So if we can move to slide 10, please.
Total sales for the full year period were down 2.9% to AUD 3.27 billion, which is off the back of a strong corresponding period in FY 2023, which grew 12.5%. In terms of comparable sales, which excludes periods where stores are closed or under refurbishment from both years, comparable sales increased 9.4% . The major stores excluded from this metric were Brisbane and Frankston and Werribee on a temporary basis. However, some of these sales will have transferred online and to other stores. I will spend some more time on revenue on the following slide. The total sales decline resulted in operating gross profit declining 2.5%, as margins remained consistent over the period. Cost of doing business increased 1.3%.
However, this was mainly due to a reclassification of delivery income to gross profit made in the current period. Excluding the reclassification, CODB was broadly flat in dollar terms year-on-year, which reflected inflationary costs being offset by cost decreases due to store closures and cost reduction activity to match the trading conditions. That brings us to EBITDA, which declined 10.2% to AUD 359.7 million on a post AASB 16 basis, which is quoted before implementation costs and individually significant items or ISIs. The decline in EBITDA was similar to the decline recorded in the first half of 10.4%, despite the first half representing 56% of revenue generated.
Depreciation decreased AUD 7.4 million or 3.6% from a reduction related to the lease portfolio, largely due to store exits, partially mitigated by changes to ongoing leases, which increased depreciation. Non-lease depreciation was consistent year-on-year. Net finance costs were AUD 4.2 million or 4.6% lower, reflecting lower interest from the lease portfolio and stable net interest on cash and debt balances, where a higher variable rate on drawn debt was offset by interest income on cash deposits. So the bottom line was a net profit after tax, but before implementation costs and ISIs of AUD 52.6 million, which compares to AUD 71.1 million last year. That means the second half recorded NPAT pre-ISIs of AUD 0.6 million, against an NPAT pre-ISIs of AUD 6.1 million last year.
As noted on this page and previously flagged, the combined Sass & Bide, Marcs & David Lawrence business was a significant drag on performance, and as Olivia outlined earlier, we have taken action to improve this. Implementation costs and ISIs in the current period consisted of impairments associated with store assets, including right-of-use assets associated with the Sass & Bide restructuring, taxation adjustments related to prior periods, and certain software-as-a-service implementation costs incurred as part of our technology refresh that cannot be capitalized, but will deliver benefit over a substantial period of time. These technology implementation costs relate to the new finance system. Statutory net profit after tax was AUD 43.5 million, compared to AUD 60.4 million last year. Moving to Slide Eleven and some further detail on sales for the period.
We think this was a resilient sales performance, given the continuation of similar macro conditions to the first half. As can be seen in the second graphic, comparable sales within our department store business increased at a higher rate in the second half than the first half. In challenging conditions, our multi-channel offer and the growing loyalty ecosystem we have with Myer One and our various partnerships certainly provides resilience at the sales line. Our online channel grew 2%, a similar pace to what was seen in the first half, and this was aided by a stronger performance from our marketplace offer. In terms of the bricks and mortar channel, we did see our key CBD stores in Melbourne and Sydney grow faster than the rest of the combined fleet. However, CBD stores have not recovered to pre-COVID levels.
At a category level, beauty was the strongest performer, benefiting from strong sale periods and the investments we made in the beauty halls. In the bottom right graphic, you can see our mix between private label, national brands, and concessions, reflecting a small shift in the current period to concessions from Myer exclusive brands, as concession brands such as Country Road were reintroduced. Moving to Slide 12 and some further detail on operating gross profit. As you can see from this slide, operating gross profit finished the period down AUD 31 million or nearly 2.5%, and OGP margin increased slightly to 36.6%. However, this included a reclassification of delivery income totaling AUD 9.1 million, as I've referred to previously.
Excluding this reclassification, the underlying margin rate declined twelve basis points year-on-year, which is a reasonable outcome in the current environment when customers have sought value and comparable to the trends we saw in the first half. The key components of this were a mixed shift to concessions during the period, which have a lower gross margin rate, but incur lower costs for Myer. Other rate-related impacts improved during the period, and this was a mixture of lower landed cost price, which primarily due to improved international freight rates year-on-year, our continued focus on improving intake margins, and an increase in supplier deals, partially mitigated an increase in markdowns during the period. Shrinkage continued to be a significant cost to the business, but reduced slightly by 3.3% in the current period, as the effective investments to improve shrinkage start to take hold.
Having said this, our shrinkage and stock adjustments expense of AUD 46 million for the year remains a significant opportunity for the business, and we will continue to invest in technology, fixturing, and our people to drive improvement. Recent cycle counts have continued to demonstrate this. Moving to Slide 13 and cost of doing business. On the left of Slide 13, you can see that CODB has increased in total dollar terms. However, when the reclassification of delivery income is excluded, it was broadly flat in dollar terms at AUD 826 million for the period. Our CODB, as a percentage of sales, increased in the current period to 25.6%, or 25.2%, excluding the reclassification. On a pre-AASB 16 basis, our CODB as a percent of sale, as a percentage of sales, remains well below FY eighteen.
In the current inflationary environment, the business has worked hard to maintain the CODB position. As you can see from the waterfall, the principal area of cost increase was inflation in the form of higher wages, both in-store and in the support office. Other support office costs increased primarily from price inflation on IT costs, including licensing, but also included additional expenditure on project activity that was not able to be capitalized. We were able to partially mitigate this through year-on-year savings in marketing and other corporate costs. Operational costs were lower, largely due to the exit of Brisbane and Frankston stores, and where appropriate, due to lower volume. Noting that in a post AASB 16 world, lease costs are included in interest and depreciation, not CODB. There were also savings in the online business as fulfillment became more efficient. Moving to cash flow on Slide 14.
As you can see from this slide, we had a strong cash flows performance during the year, with operating cash flows before interest and tax of AUD 374 million, and an increase in cash conversion to 106%. Further down the cash flow statement, you can see a significant decrease in tax paid, which reflects that in FY 2023, additional income tax was paid due to the timing of tax installments coming out of COVID, and this was not a factor in the current period. Cash CapEx, net of landlord contributions, was down from the prior year to AUD 69 million, with the bulk going to store investments, including the Marion and Chermside refurbishments, but also into new fixturing and formats, as well as the aged infrastructure upgrades we have talked about previously.
CapEx also reflects investments in significant projects, including the National Distribution Center, the new Queensland DC at Wacol, the new POS software, as well as our ongoing investments in our online platforms. Overall, net cash outflow of AUD 3.7 million was AUD 60.5 million favorable to the same period last year, which was mostly due to the additional AUD 53 million of dividend payments in the prior year, including the interim special dividend. Moving to the balance sheet on Slide 15. The key call-outs regarding the balance sheet are as follows: Total inventory at year-end was AUD 3 million lower than the corresponding period, which has reflected our focus on maintaining newness and purchasing discipline in the challenging consumer environment. The ratio of department store clearance inventory and stock greater than six months aging is consistent year-on-year, and has remained relatively low compared to historical positions.
As is normally the case, inventory over six months is predominantly in non-seasonal categories that are less sensitive to age, such as cosmetics, home, and entertainment. Right-of-use assets are AUD 63 million lower than the prior corresponding period, mainly as a result of depreciation, but offset by new leases and the recognition of option periods where they are reasonably certain to be exercised. Fixed assets are consistent year-on-year, and finally, net cash, we finished the year in a positive net cash position of AUD 114 million, which is down AUD 6 million year-on-year, and I'll talk more on that on the next slide. So turning to Slide 16, please. On this slide, you can see the net cash position the business has maintained since COVID at the end of each period, although, as previously mentioned, there is seasonality in our cash position at various points.
We finished the half with net cash of AUD 114 million, and when the fully drawn component of our facility is excluded, we had cash balances of AUD 176 million at the end of the period. In terms of our net cash position, it is AUD 6 million lower than the prior corresponding period, which is a significant improvement from the AUD 56 million unfavorable year-on-year position reported at the end of the first half, which was influenced by the timing of the special dividend payment in May 2023. The lines in the bottom chart depict net cash across the financial year and the prior period by day. FY 24 is depicted by the orange line, and it demonstrates the year-on-year net cash position converging as the year progresses.
The orange line only drops below zero and into a net debt position for a short period in November before our key trading periods, and the graph shows that that lasts for about eight business days during the first half. Our current debt facility term expires December two thousand and twenty-five, and it has provided the flexibility to reestablish a solid foundation for growth. The slide demonstrates the strength we have built in the balance sheet over a number of periods, which has supported the increase in investment on key projects to drive future value and franked dividend distributions to shareholders. Turning to my final slide, Slide 17. I wanted to give a brief update to what we are seeing in the first seven weeks of trade to Saturday, fourteenth of September.
For department stores only, comparable sales growth was 0.2%, and this excludes the impact of the temporary closure of the Werribee store. So to date, we are seeing similar market conditions to what was seen in the most recent period, although I would note that this is not a significant trading period. So before I hand back to Olivia, to summarize FY 2024 from a financial perspective, we continued to see a challenging consumer environment, but the strong foundations the business has built over recent years allowed us to deliver an improving comparable sales growth as the year progressed. This was a robust outcome, considering the prior period of FY 2023 represented such a strong sales performance for the business.
While earnings were impacted by the underperformance of Sass & Bide, and Marcs and David Lawrence, as well as store closures, our focus on costs, cash generation, and maintaining balance sheet strength, have assisted in navigating this period and allowed us the opportunity to make progress on key initiatives. While we remain cautious about the macro environment, we have a strong inventory position and plans for the upcoming peak period, and are well-placed to take advantage of opportunities and any improvement in macro conditions going forward. On that note, I'll pass you back to Olivia.
Thanks, Matt. Let's turn to slide nineteen, and before I turn to some strategic observations, I think there's merit in taking stock of where Myer is today. The team, as Matt said, has been focused for some time on stabilizing Myer's trading and financial performance, and also on building a platform for future growth. The charts on this slide speak for themselves. You can see the progress has been made in terms of arresting the sales decline in prior years, growing our online business, reducing clearance inventory, improving in-store sales productivity, reducing our cost of doing business, growing net profit, building our Myer One membership, and strengthening our balance sheet. If you look at Myer today, we have strong foundations to build on, with some unique competitive strengths that we can leverage to drive future growth. We have a strong brand underpinning the business.
Myer has 124 years of retail heritage, and last week it was confirmed that we had retained the position of the seventh most trusted brand in Australia. We have an engaged frontline team with 85% in-store customer service satisfaction rating, and a comprehensive offering across a wide range of price points, providing broad customer appeal. We have a strong multi-channel offer with significant scale. Our ability to serve our customer with a connected customer experience across our 56 stores in prime locations nationally, and an online business that exceeds AUD 700 million in sales annually, is a distinct advantage to many of our competitors. Our data shows that customers who choose to spend across stores and online spend 2.4 times more on an in-store basis only. This is an incredibly powerful multi-channel metric, and one which we believe has further potential.
Our loyalty and partner programs not only provide the backbone for current performance, but also represent enviable assets with significant further potential very few businesses can match globally. Myer One is one of the largest and most engaging loyalty programs in Australia. Myer One has more than 10 million members, with three in every four directly contactable through our digital marketing program, and about 77% of our total sales are generated by Myer One members, and our data shows that Myer One customers spend 82% more with us than non-members. This is a great foundation to leverage more from our loyalty program. We also have a compelling Pay with Points program, with strong partnerships with CBA, Amex, and Virgin, that provide us with access to approximately 36 million combined members. All of these factors reinforce the huge future potential growth. Importantly, our balance sheet is robust.
We now sit with AUD 114 million in cash as at 27 July 2024. It's a platform to fund sustainable growth initiatives that capitalize on our competitive strengths. I'd now like to turn to some more initial strategic observations, which start on slide 21. These observations will be of the business and of the opportunities that exist for growth. As I mentioned earlier, when I took the role as Executive Chair, we commenced a comprehensive strategic review with the objective of identifying opportunities to deliver a step change in Myer's market position and generate substantial strategic and financial benefits. Myer operates in a AUD 70 billion market, with a 5%-6% compound annual growth.
We have strong hold positions in high-margin categories, such as beauty and apparel, and a right to win in categories such as home, which provide us with opportunities to broaden our customer base and appeal to a younger and more fashion and experience-conscious customer segment. This represents a rebalance away from a predominantly price and promotional-seeking customer. The preliminary phase of our strategic review has identified opportunities for us to create value by enhancing and expanding our private label and exclusive brands portfolio. These are high-margin generators, and it is important to optimize the sales contributions of these brands to drive bottom-line profit growth. You heard me talk earlier today about our GP margin being adversely impacted in FY 2024 by the shift in more concessions in our sales mix.
This is a challenge we can address by growing our private label and exclusive brand portfolio, hence our decision to suspend the sale of Sass & Bide, David Lawrence, and Marcs, and to retain these brands. As you know, we've also embarked on discussions with Premier Investments to explore a potential combination with the Power Brands. This would add brands such as Just Jeans, JJ, Portmans, Jacqui E, and Dotti to our portfolio. When we think about our GP margins, it is not just about expanding our private label and exclusive brands portfolio, it also requires a more disciplined approach to pricing architecture and ensuring we optimize the return on investment of our promotional spend. This is where our Myer One loyalty program is invaluable.
It allows us to move our promotional spend into our loyalty program to increase engagement, lifetime value, and share of wallet, as well as attract new members. I see real opportunity to unlock the full potential of Myer One by refreshing the core program, commercializing opportunities, building the partnerships ecosystem, and elevating it into a digital product with constant relevance for engagement. On Slide 22. There is further scope to reimagine our e-commerce experience by investing in technology and leveraging valuable data to personalize our promotions and to differentiate our product offering. We have the ability to convert single-channel shoppers into omni-channel customers, who, as I mentioned earlier, spend 2.4 times more than our single-channel customers. This is not confined to a better e-commerce experience, but also the overall digital experience as we link our Myer One loyalty program and greater personalization capability into this opportunity.
Myer currently generates 65% of its sales from store-only customers, 10% from online-only customers, and 25% from omni-channel customers. There is significant leverage if we can grow our omni-channel customer base. From a store's perspective, there is continued opportunity to enhance our productivity across the fleet as we look to adjust our formats and optimize ranging. As we look more holistically, we believe there is a stronger and more long-term opportunity to reset our overall store proposition and experience across all catchments, including flagships, but importantly, throughout the middle of the estate, which holds significant latent potential. We have an opportunity to enhance our floor space productivity by adjusting our formats, optimizing our ranges, in particular, in the middle of estates. This is resetting our proposition across all catchments, not just our flagship stores.
From a people and community perspective, our people are obviously our greatest asset. We must, and we will continue to invest in them to realize our full potential. We will look to invest capacity and capability for key growth areas. We are also committed to continuing our investment in tools and technology, such as the M-Metrics app highlighted earlier, to support our team members and underpin better performance. As I move into occupational health and safety, I did want to pause for a moment to reference a tragic incident involving a contractor at our distribution center earlier this month. We've all been deeply affected by this tragedy, and our thoughts are with his family, with his friends, and obviously with our colleagues. We are working closely with authorities and our supply chain partners to ensure improvements and learnings are captured and implemented.
More broadly, as part of the strategic review, we will be looking at safety measures across the business with particular consideration, given the changing workplace dynamics, including the continued focus on customer aggression and mental well-being. And finally, as we look to profitability and costs, we'll continue to introduce more disciplined cost and capital management. We believe there is an immediate opportunity to tighten, particularly as it relates to promotional spend, shrinkage, and tighter control of inventory. As we lean into growth, we will also focus on implementing a more robust financial framework that links capital allocation to total shareholder return, generates attractive returns on investment, and delivers the lowest of capital. More will be shared on our Investor Day strategy later in the year. Now on to Slide twenty-three. These initial strategic observations are all being assessed as part of our broad-ranging strategic review.
We are well progressed in our review and are focused on how we reposition Myer's retail platform for sustainable and profitable long-term growth in an evolving retail landscape. While the strategic review remains ongoing, the preliminary phase has identified growth of Myer's private label and exclusive brand portfolio as a strategic priority. Our discussions with Premier Investments about a potential combination with their apparel brands business, which we announced in June, are progressing, and due diligence is underway to enable us to assess these opportunities that a combination could create to deliver material value for all shareholders through significantly enhanced scale, revenue, and growth, material cost and revenue synergies across supply chain, sourcing, property, and brand management, and the ability to leverage Myer One loyalty program and e-commerce platform across an enlarged customer base.
A larger and more diversified shareholder base with improved trading liquidity and greater access to capital. As we are in due diligence at present, we will not be making any further comment on this potential transaction until it's appropriate to do so. Now onto page twenty-four. In terms of the next steps, we are working towards finalizing our comprehensive review of the business. As part of this, we want to complete our due diligence on the potential combination with apparel brands, and undertake the steps I learned earlier to improve the performance of Sass & Bide, Marcs and David Lawrence. Once this is done, we do anticipate hosting an investor strategy session to provide the market with an update on our strategic review and future plans for the business. I'll now open to any questions that you may have for either Matt or myself. Thank you.
Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you're on a speakerphone, please pick up the handset to ask your question. Your first question comes from Ben Gilbert with Jarden. Please go ahead.
Good morning, Olivia and Matt. Just first question from me, and probably a bit of a short-term one, but just on the trading update, just how you think you're seeing that in the context of the market? Because a lot of the data, I suppose, and some of the other retail trading updates have suggested that trends might have improved a bit couple of months with tax cuts. Just how are you seeing that, and if you have seen color in how you feel you're performing at different age cohorts in terms of sort of younger versus sort of middle and, and then the boomers?
Yeah, I think, look, as we mentioned during the presentation, Ben, that we don't see any significant changes in the macroeconomic outlook. And I think that's clearly indicated in our trading update. Obviously, as Matt indicates, there is some variance in performance across different verticals. Beauty, for example, continues to perform despite the tough trading conditions. So we're cautious, but we're obviously well-positioned and poised to capture any upside if the market conditions change, and we're obviously very focused on Q2, which is an important trading period for all retailers. And I would just say that obviously from a Myer One perspective, which we have outlined, we are seeing ongoing growth in the Myer One program.
That is an important foundation for us, an important driver for sales, and we have seen a younger cohort come into the Myer One program. But we are very focused across the board, and given the broad, I guess, broad offering of products within Myer, we do have flexibility to make sure that we have the right offering as we lean into Q2, through apparel, through obviously our beauty business, through home. We obviously have diversification across all our product offerings, which means that if there is improvements across the board, that we will be ready to participate. But we're cautious and trading remains tough.
Just a second one for me. I appreciate you, you're not gonna say during the Premier discussions, which makes sense. But just in terms of making some of your strategic review and executing on some of the things you'd like to do, presumably any external conversations around some of these sorts of things, you'd probably wanna have wrapped up sooner rather than later? Because obviously, it's pretty integral in terms of where you're looking. And then just in that light, how are you thinking about things like marketplaces and trying to broaden or sort of further monetize the loyalty and data capabilities you've got within the group?
Yeah, look, I think as I've indicated from a strategic review perspective, this kicked off in March, and it is ongoing. And what I would say is that, you know, this review is ongoing. It is considering the entire business in its entirety, but where there are opportunities, we are moving. And I would point to the Sass & Bide opportunity, is we have identified that we believe there's an opportunity around private label, and it's why we've acted on Sass & Bide. And the ceasing of that particular sale process, and obviously we're leaning into how we can look to change those businesses, bring them closer into Myer, tap into our capacity in e-commerce and Myer One.
So the way that I think you should consider it is strategic review ongoing, and we will look to update the market at some stage later in the year. However, where there are opportunities, we are acting fast and being agile to make sure that we can act where we see there is opportunity. Part of the review, you mentioned there what we should be doing around Myer One. Obviously, loyalty will be a key theme. We do believe that there is significant opportunity there. This is already a large base of customers, 10.4 million, but importantly, a really engaged base as well, Ben. There's 4.4 active members, and that engagement is growing.
And that's what anyone with a loyalty program should be looking at: the level of engagement, and that is growing and going in the right direction, and that provides a strength for us going forward, and it's about giving us insight into what the customers want, so that we make sure that we have the right product, to get it in the right channel, and that we can provide greater personalization as well. So this will be a key theme as we approach the strategic review, and we've got great strengths that we can build on, but we're not idle. Where there's opportunity, we're gonna jump on it as well.
Fantastic. Thank you.
The next question comes from Mark Wade, with CLSA. Please go ahead.
Good morning. Thanks for taking the question. I think there's some really clear and good signs of health in that Myer brand. You talked about the Myer One members and the tag rate, customer satisfaction, so that's all great. The question I have is, I mean, you clearly struggle with these specialty store brands, Sass & Bide, et cetera. If it's a sign you're not the natural owner, why double down with another 600 stores from Premier? ... I mean, I would have thought there's enough on your plate with just 56 big Myer stores, and instead you should be, you know, giving those guys Sass & Bide or certainly taking on the premier brands as concessions only, not another 600 nightmare stores to handle.
I don't look at it in the same way. I would dismiss the premise of your question, but I understand the question, and it's about are we the right owners for specialty brands, and why are we doubling down? Let's take a step back.
Exactly.
Yeah, understand. Let's take a step back and have a look at, firstly, as I mentioned before, FY 2024 was a tough year for Sass & Bide, Marcs and David Lawrence, but prior to that, these businesses had been contributing, right? So it's had a tough year, but prior to that, excluding COVID, these businesses actually did provide economic contribution to Myer. So let's put that to one side. The reason why we believe that with Sass & Bide, Marcs and David Lawrence, that there is a pathway through here, is because of all the combination of things that I've talked about before. That we understand our customer, we know what they want, and we have the assets to drive consumer behavior through our loyalty program.
We've got the fleet of the fifty-six Myer stores, plus we have a strong e-commerce capability. So the combination of these assets, we believe that we can drive these businesses in a different way. They have previously been run at arm's length, and we're bringing them closer, and we'll be looking at making sure that we can throw all the assets that we have at Myer, whether it be Myer One, whether it be our e-commerce capability, whether it be our data smarts. So we are bringing these brands closer, right?
And then when I think about apparel brands, and while we're not going to go into a huge amount of detail here, as I said, I think we've been pretty clear about what the strategic intent is for apparel brands, and why we believe that this will deliver returns for our shareholders, and also be a very attractive proposition for our customers. For our customers as well. So it's through both of those lenses. It does give us scale, it does give us diversification, and importantly, it gives us the capacity to be able to leverage Myer One beyond the existing base. So I think it's pretty clear what strategic benefits it delivers our shareholders. We're obviously going through a due diligence, though, and we'll have more to comment on that at an appropriate time.
Strong rebuttal. Thanks so much. All the best.
Anytime.
The next question comes from [Unclear] with Morgan . Please go ahead.
Thank you, Olivia and Matt. That was a really good presentation, so thanks for that. Three questions for you. Just, firstly, you mentioned, Olivia, that CBD stores had not fully recovered from the pandemic. I wonder if you think that a full recovery is possible and what needs to happen to bring it about?
Yeah, sure. That you're absolutely right. Matt did mention that our CBD stores, while they had recovered stronger, they haven't recovered to pre-COVID. And I think we're not alone in that, right? You'd speak to many retailers around. There are some challenges with bringing people back, however, they are recovering quicker than others. And I think that we will. You know, there is a lot of conversation going on inside our business around how do we bring people back in store? How do we rethink the in-store experience? And I think over time it will rebuild. I've got no doubt about that. It's just gonna take time. And I'd also say there's some differentiation between states as well.
We are seeing some, you know, some different variables play out post-COVID, but we're very confident that people are coming back, and that foot traffic will continue to build, not only in our flagship stores, but importantly, that middle estate that I've mentioned a few times, that there's great opportunity there as well. But it's on us to make sure that we deliver a great customer experience. And I think you can see from the results that customer satisfaction in-store continues to build for Myer, which means that our customers are receiving the service that they enjoy and will bring them back. But, you know, Myer's not just reliant on CB, on CBD. But I think watch this space, it'll continue to build. It's on us to continue to improve in-store experience.
It's on us to continue to deliver that great service, and once again, Myer One will differentiate Myer above anyone else.
Thank you. Secondly, you mentioned that Myer has a right to win, you said, in categories such as home. I'm just wondering what it is about Myer that confers that right, and if there are any other categories we should be thinking about at the same time?
Yeah, I think, I mean, our home business performs quite well. Obviously, it's a key pillar for us as a department store, and I think there's an opportunity for cross-sell, and we probably haven't spoken about the cross-sell opportunity. And what I mean by that is, having the diverse customer base gives you an opportunity to encourage our customers, not just to be shopping in apparel or not just to be visiting the beauty hall, to actually entice them to actually think about other categories, including home. And look, we have seen strong performance of home growing over the last four years. I think the offering is particularly strong within Myer, and I know that from talking to our customers and understanding the customer data, that they do look to Myer to...
For their offerings from a home perspective. So it's one to watch, and I think it's also performing really well from a Myer exclusive brand perspective, which is what we call home brand or private label. So from a home perspective, Myer exclusive brands, home is also an area that we actually perform really well in, and we'll continue to invest to make sure that that can grow into the future.
... Excellent. That's a segue into my last question, which is just with regard to private label and exclusive brands. I'm just wondering what role they play in attracting that younger customer into the Myer ecosystem, please?
I think they can play a really strong role, actually. I think they can play, and I think the beauty for us is that we're possibly, potentially underweight at the moment in an offering for a younger demographic in relation to apparel. I wouldn't say the same in beauty. That obviously for us, it's all about the curation of brands that you have in store, not only private label, but yeah, they can absolutely play a key role. We'll be leveraging the insights that we get from Myer One, obviously to understand what are the products that our customers want, and how can we track the right customers into store and online.
Importantly, obviously, private label isn't only about having the exclusivity from a customer perspective and giving them a reason to shop at Myer. Importantly, it also delivers greater value for us, you know, greater margins, which is important from a, from a shareholder perspective.
Thanks for-
I would just say, though, just on the younger market, we're not – we are looking for a broad appeal, and that's the beauty of what the Myer One program can give us. We do have a very loyal customer. Our opportunity here is to really stretch out into slightly younger, but also more fashion-focused customer. It's not all... It's not only about the demographics, it's about having broad appeal and making sure that we have something for every Australian.
Very clear. Thank you.
Your next question comes from James Tracey with Blue Ocean Equity. Please go ahead.
Hi, Olivia. Hi, Matt.
Hi.
Could you please provide a bit more color on the gross margin differential between your own brands, third-party brands, and the concessions?
Yeah, sure.
Yeah, I can take that one. So, our own brands are sort of early 50s% gross margin, national brands around 40%, and concessions early 20s%. And you know, what I would say, though, is that can vary quite dramatically by category, so the numbers I'm giving are quite average across the business.
Therefore, when you have a look at those margins, it gives you, I guess, a fairly good insight into why we say that we need to win in private label. That's across the board. That's not just in apparel. That's also in home and obviously in kids, but it is about a balance. You know, we wanna make sure that we're delivering for our customer, that we have an offering, a curation of the right products for any particular customer, and therefore, it is about having the balance, about having the right national brands, about having the right private label as well. It is about balance, and it's about curation that you only get if you really understand your customer and what they're wanting for in any particular vertical.
With regards to the strategic review and expanding gross margins, do you think there's an opportunity to increase the margins of those three categories? Or is it more about the mix, you know, shifting the mix towards higher margins?
Yeah, I think there's always opportunity, so then we're not leaving any stone unturned, so there's always opportunity for us, whether it's from a customer perspective, you know, whether it's a cost of doing business, whether it's about driving loyalty, whether it's about improving our operations. The strategic review will be assessing all aspects, and we look forward to sharing it with the market at a later stage.
Okay. And, just a final question on online and the profit margins online. Can you comment on whether that online business is, you know, similar to store margins, or higher, or lower?
Yeah, I'll take that one as well. So, look, it's. We tend to look at it that if it's an incremental sale, then it's either dark dollar accretive. You know, but it can be, you know, margin diluted depending on the type of product we're sending at the time. So look, there's not a huge difference at a contribution margin level, but at the moment, it is complicated by the fact that, you know, a lot of our fulfillment happens from stores. So hopefully that gives you a bit of a flavor, but ultimately, at an incremental sale perspective, it's either dark dollar accretive.
Yeah. And look, I would just say about the online, it obviously is improving, and we've talked here, and I know it's a term that's often used around omni-channel, but that, that absolutely is critical for Myer into the future. The online channel is a, you know, in some ways, one of the most important doors that we have, and that we do believe that e-com can be, a real driver for growth and a way that we can engage a broad customer base. And coming back to Myer One and data, the fact that we do understand our customers, the fact that we do have significant data assets, will mean that this will assist us in growing the right sales online, and making sure that we give customers the choice of channel that they, they choose to purchase in.
Whether that's social commerce, whether that's e-commerce, whether that's online, we truly believe that this can be an advantage for Myer, and that the insights and the data that we have within Myer One can help drive this engine.
Many thanks, Olivia, for that.
No worries.
The next question comes from Johannes Faul with Morningstar. Please go ahead. Hi, Johannes, your line is now live.
... Clearly answered all these questions.
Move to the next question, which is from Chami Ratnapala with Bell Potter Securities. Please go ahead.
Yeah, good morning, Olivia and Matt. Thanks for taking my questions. I think firstly, just to do a quick follow-up on the comps growth. Maybe comparing that, the promo period, which had that June sort of massive promo period, which I'm sure would have assisted the Q4. How are customers sort of responding outside the sales period, or how is it tracking, compared to the last quarter or August, September versus July, if you can provide anything further?
Now, look, let me just talk generally. I mean, we have indicated that, you know, that's been a challenging, you know, and tough conditions of trade at the moment, and that obviously, sales activity helps drive consumer behavior. And, you know, sales or, you know, sales activity or promotional activity, always obviously an important tool for any retailer. But, and that's no different from today, that we have seen, we've seen our sales actually perform reasonably well. And obviously we're now just setting ourselves up for Q2. Obviously a big sales period, but also a big promotional period, with Black Friday and the sort.
So not gonna drill down into the details on how various periods have traded or how different sales activity is traded, but overall, that's what I would say, is that the consumer is looking for value. There's no doubt about that, and the opportunity for Myer is to make sure that we provide that right product at the right value, and that we get ready for peak trading periods like Q2.
Perfect. Thanks for that, Olivia. And the second thing is, nice to see gross margins improving one percentage point. Although Myer Exclusive Brands, as a percentage of contribution, has slightly softened. What's driving the positive outperformance here?
I think the question was around gross margins and the mix?
Yeah.
Yeah.
I'll just take that. So, I think as I called out, that gross margin went up in percentage terms or rate terms, primarily due to reclassification. And it went down marginally by about 12 basis points from memory. Let me just check. Yeah, excluding the reclassification, the underlying margin rate declined 12 basis points year-on-year, and we called that out as due to sales mix towards concessions.
Okay, thanks for clarifying that, Matt. And I think lastly, the cost base also on a pre-AASB basis looks pretty consistent and looks good. I mean, maybe if you were to think about the business, do you consider this the right cost base, right level of the cost base for the existing business, considering current demand conditions and taking into consideration the existing ongoing review?
At this stage, I think what I called out in regards to twenty-four is, there were some things going on there. Obviously, inflation, particularly around wages, et cetera, are coming through, but we did have some cost savings associated with the fact that, there were a couple of stores that were closed year-on-year. So, look, I think going forward, we're always focused on cost and efficiency, and that's been a hallmark of the past few years, and, I don't see that changing as we move forward.
Perfect. Thanks for taking my questions. All the best.
Thank you. I'd just like to thank everyone for joining the call today and taking time. We do appreciate your ongoing support of Myer. Look forward to meeting many of you one-on-one over the next couple of weeks. And thank you, everyone, for dialing in, and we'll catch up again soon. Thank you.