Thank you for standing by. Good morning. Welcome to the analyst and investor call for Myer's 2024 half-year results with Myer's Chief Executive Officer John King and Chief Financial Officer Matt Jackman. All participants are in 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'll need to press the star key followed by the number one on your telephone keypad. I would now like to hand the call over to Mr. John King. Please go ahead.
Thank you. Good morning, everyone. Thank you for joining the call today, to investors and analysts, and also to media who join on a listen-only basis. I'm John King, CEO of Myer, and I'm joined today for the first time by our new Chief Financial Officer, Matt Jackman. As you're aware, Matt has been in the business for some time as Deputy CFO, providing not only great continuity with his appointment to the CFO role but also a depth of Myer experience and IP that is essential as we continue to deliver against our plan. So welcome, Matt. Please note this call is being recorded. Before going any further, I'd like to take a moment to recognize the various traditional lands in which we all do our business today, as well as acknowledging their elders past, present, and emerging.
To the agenda for today, I'll begin with an overview of the first half 2024 results, then I'll hand over to Matt who will provide you with more details on these financials. I'll speak further on our Customer First Plan, which is the strategy we outlined in September 2018 and underpins everything we do. After that, there'll be an opportunity to ask questions. Let me take you through the key financials on slide four. In line with our trading update issued on February 6th, 2024, we're pleased with the strength and quality of our half-year results. The Customer First Plan continues to deliver for Myer despite the macroeconomic conditions. We were able to achieve a strong, comparable sales outcome cycling our best ever first-half sales in FY 2023 and continued market share gains across both stores and online.
We have a powerful multi-channel offer, which remains strong and a key point of difference for us. We have a strong online offer now representing 21.3% of total sales, with group online sales up 2% year-on-year. NPAT before ISIs remained robust at AUD 52 million, although down on that strong performance in first half 2023. However, it is up 31% on first half 2020 pre-COVID. This result was impacted by the environment to an extent and the pressure on promotional cadence, but also the removal of our Brisbane CBD store. Importantly, we continue to deliver a strong balance sheet of AUD 212 million in net cash and our focused approach to inventory, which we have managed tightly, down AUD 10.5 million or 2.7% on the prior corresponding period.
Finally, we are pleased to announce that we have declared an interim fully franked dividend of AUD 0.03 per share, again reinforcing our confidence in the business and delivering value back to our shareholders. Moving to slide five. From a sales perspective, it's remained strong despite the obvious macroeconomic headwinds. On the comp sales results, we are pleased to deliver broadly the same as last year, which was our best ever first half on record. From a total perspective, we were down 3% on last year, which was largely due to closed stores in Brisbane CBD and Frankston. However, sales for the first half still represented a CAGR of 3.3% since pre-COVID level, or 13.8% positive increase since first half 2020.
This result has been achieved against a tougher retail landscape and, importantly, has translated into greater market share across in-store and online, according to our commissioned report with Mastercard, which analyses the top 200 discretionary retailers. We also continue to see resilience in our CBD stores, which have continued to build, delivering a stronger performance than the rest of the fleet, certainly across the key retail periods of Christmas and Black Friday. Online sales have returned to growth, with sales of AUD 390 million for the first half, up 2% and, as I said earlier, representing just over 21% of our sales. Moving on to slide six. MYER one continues to deliver for us record results, underpinning the strength of our performance. This year, we have seen another record year for MYER one engagement, active customers, and continued strong acquisition of new members.
The strength of this program, coupled with our partnerships Pay with Points programs, are resonating strongly with our customers and providing a strong point of difference. Our MYER one engagement is represented by our tag rate, which now sits at 76.2% of all transactions. This is our strongest since the inception of the program in 2004, 20 years ago. As I've mentioned before, one of the key areas - excuse me - when we assess the power of our loyalty program is not just the top-line total number of customers, but the number of unique customers who are engaged with us, or active members, as we call them, meaning those who have spent money with us in the last 12 months. The program now has the highest number of active members at 4.3 million, up 5.7% year-over-year.
This has been a result of strong acquisition across in-store and online, which generated growth of 374,000 new customers in the half, particularly in the younger demographics, with 55% coming from the under-35 age group. We've continued our investment in enhanced analytics, AI, and machine learning models, which are driving greater CRM benefits and providing stronger platform for personalization and producing the highest incremental revenue on record from our own channels. This program will continue to provide a foundation for future growth and a unique positioning in the market, which is clearly demonstrated by the fact that those customers that are MYER one members spend 82% more than non-Myer members. Moving to slide seven, I just want to touch on our merchandise offer.
As we have stated previously, we've continued to deepen the relationships with our key brand partners, providing shared success, which has unlocked greater investment and exclusive and preferential products. As an example, through these partnerships, we have invested in extended ranges and new shop-in-shop concepts. This provides a much stronger brand experience for our customers in store, with over 174 new shop-in-shop concepts delivered in the first half alone and more to be rolled out in the second half. We've also seen the continued rollout of new brands, including the CRG group, in the first half 2024, with the reintroduction of the key Country Road brand returning for the first time in five years, providing new reasons for our customers to shop fashion and proving very popular with customers so far.
You will see from the chart that we have a balanced merchandise model across all major categories, which has provided us with greater resilience during uncertain times and allows us to flex accordingly based on that changing customer demand. Equally, we remain disciplined in our inventory management, with improved stock availability compared to second half 2023, which is driving the newness in merchandise that customers want to buy. So onto slide eight. We continue to invest in the store experience. You will see from this slide the customer satisfaction has moved from 73% in FY 2019 up to 84% in first half 2024. That represents a more than 15% improvement over that period. There has been a significant movement and is a result of many factors, including our store refurb program, which included Marion, Ballarat, and Chermside in the first half.
These refurbs provided new brands, improved store layouts, and better facilities for our customers, which have resulted in greater productivity and performance. We've increased the focus on in-store customer service, leveraging our own proprietary technology in our M-Metrics team member app. This app is available to over 8,000 team members, including now being rolled out to our brand partners, allowing team members to get real-time digital comms, product knowledge, and performance recognition delivered direct to their personal mobile device. We've also increased investment in in-store signature customer experiences. A few examples include Christmas Giftorium, Santaland, school holiday programs, brand masterclasses, and, of course, our Melbourne Christmas Windows.
This past year, our windows featured Bluey and was our best ever in the history of the Christmas Windows, attracting more than 2.4 million visitors over double our pre-COVID period, which demonstrates the important role they play not only for Myer but also for the city of Melbourne during the Christmas period. Finally, we've expanded our retail development programs in store to ensure we are creating greater pathways and learning programs for our team members to ensure we foster the next generation of leaders. Importantly, we see one in three of the members graduating getting promoted to the next level in their management career. So to slide nine. Our Customer First Plan continues to deliver for us. This plan has yielded significant improvements in all aspects of Myer, and the output of that progress is tangible improvement in some of the key metrics shown on this page.
As mentioned, customer service has again improved, with the satisfaction moving from 73 in 2019 to 84 in 2024, up 300 basis points year-over-year. Customer engagement has improved with our MYER one tag rate since inception, sitting at 76%, up 270 basis points year-over-year. Our online business now represents just over 21% of total sales. It is returning to growth and, with improved fulfillment capability, already delivering strong returns. We've improved our products and inventory management through an increased focus on the big brands and a more balanced offer with a AUD 10 million reduction in inventory year-over-year so far. We've improved store sales productivity, up 1.1% year-over-year by optimizing space, brand adjacencies, and refurbishments. We've continued to right-size our cost base through a focused management on costs to mitigate inflationary pressures, which was broadly flat this year, including reclassifications.
I'd now like to hand over to Matt, who will go over these financial results in more detail. Thank you, Matt.
Thanks, John, and good morning, everyone. Overall, we think this is a solid result when we consider the challenging consumer backdrop across the first half, cost inflation, and the impact of store closures, including the Brisbane CBD store. Achieving comparable sales growth, given we are cycling such a strong comparative period, demonstrates the improvements we are making are resonating with our customers and the resilience we continue to build in the business. So if we can move to slide 11, please. Total sales for the half-year period were down 3% to AUD 1.83 billion, which is off the back of a very strong half in first half 2023, which grew over 24% against the prior corresponding period being first half 2022. In terms of comparable sales, which excludes periods where stores are closed or under refurbishment from both years, comparable sales marginally increased 0.1% in the current half.
The major stores excluded from this metric were Brisbane and Frankston. However, some of these sales will have transferred online and to other stores. CBD stores saw improved growth versus the rest of the fleet, as we saw strong performance in these formats over key trade periods. Our beauty category delivered the strongest growth over the prior period, as investments in our beauty halls resonated with customers. As noted earlier, we saw a return to sales growth in our online channel, with the channel representing 21% of total sales. The total sales decline resulted in operating gross profit declining 2.7%, and I'll provide further detail on the following slide. Costs of doing business increased 1.6%. 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 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 10.4% to AUD 215.7 million on a post-AASB 16 basis , which is quoted before implementation costs and individually significant items, or ISIs. Depreciation decreased AUD 4.5 million, or 4.4%, reflecting lower net CapEx spend in the COVID years and that major projects in our recent CapEx spend were not yet completed at the end of the first half. It also includes a depreciation reduction related to the lease portfolio, largely due to store exits, partially mitigated by changes to ongoing leases, which increased depreciation.
Net finance costs were AUD 1.7 million, or 3.6% 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. The bottom line was a net profit after tax but before implementation costs and ISIs of AUD 52 million, which compares to AUD 65 million last year. Implementation costs and ISIs consisted of taxation adjustments related to historical periods and certain software-as-a-service implementation costs incurred as part of our top technology refresh that cannot be capitalized but will deliver benefit over a substantial period of time. These technology implementation costs in the half relate to the new finance system. Statutory net profit after tax was AUD 50.5 million compared to AUD 65 million last year. Moving to slide 12, operating gross profit.
As you can see from this slide, operating gross profit finished the half down AUD 18 million, or nearly 2.7%, and OGP margin increased slightly to 36.4%. However, this included a reclassification of delivery income totaling AUD 5.1 million. Excluding this reclassification, the underlying margin rate declined 20 basis points year-on-year, which is a reasonable outcome in the current environment when customers have sought value. The key components of this were a mixed shift to concessions during the period, which have a lower gross margin rate. Concession sales increased marginally year-on-year as new shop-in-shops were rolled out and new partners such as the Country Road Group of brands performed well.
Other rate-related impacts improved during the period, and this was a mixture of reduced freight costs with our average cost per TEU in the current half falling versus the corresponding period, focus on improving intake margins, and an increase in supplier deals, which partially mitigated an increase in promotional cadence in response to the trading conditions. FX changes were not a significant impact in the current half. Shrinkage continued to be a significant cost to the business but stabilized after the significant ramp-up seen post-COVID. We saw an improvement in shrinkage trajectory as cycle counts progressed across first half 2024 as investment has been made in store service and retail loss members. Apologies. The line we've just been advised to cut out, so I'm going to start my comments again from the start of slide 13, CODB.
On the left-hand side 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 444 million for the half. Our CODB is a percentage of sales increased in the current half to 24.6%, or 24.3% excluding the reclassification. It remains well below pre-COVID levels when, in first half 2020, it was 25.6%. In the current inflationary environment, the business has worked hard to maintain a broadly flat CODB. As you can see from the waterfall, the principal area of cost increase was inflation in the form of high wages both in-store and in the support office.
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 capitalised in the merchandise supply chain and loyalty areas. 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. 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 quicker and more efficient. Moving to cash flow on slide 14. As you can see from this slide, we have had a strong cash flow performance during the half with operating cash flows before interest and tax of AUD 287 million and an increase in cash conversion to 134%.
Noting that the first half is a seasonally strong period for cash conversion, given it includes the key trade periods occurring in the second quarter. 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 half. Cash CapEx, net of landlord contributions, was up from the prior year to AUD 45 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 previously flagged.
CapEx also reflects investments in significant projects, including the National Distribution Centre, the new Queensland DC at Wacol, the new POS software, as well as our ongoing investments in our online platforms.
Overall, net cash flow of AUD 93.2 million was AUD 10.7 million favorable to the same period last year. Moving to the balance sheet on slide 15. The key callouts regarding the balance sheet are as follows. Total inventory at half-year was AUD 10 million lower in the corresponding period, which has reflected the focus on maintaining units and purchasing discipline in the challenging consumer environment. And whilst the ratio of department store clearance inventory and stock greater than six months aged is up on the corresponding period, it has still remained relatively low compared to historical positions. A lot of the aged clearance inventory is being sold through post-period ends, and inventory over six months is predominantly in non-seasonal staples that are less sensitive to age, such as cosmetics, home, entertainment, and meals.
Right-of-use assets are AUD 52 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 up, reflecting investment in stores. Finally, net cash. We finished the half-year in a positive net cash position of AUD 212 million, which is down AUD 56 million on the prior corresponding period. I'll talk more on that on the next slide. Returning to slide 16, cash and liquidity. On this slide, you can see the healthy net cash position the business has maintained since COVID at the end of each first half period, which comes at the end of key sale periods in our second quarter. We finished the half with net cash of AUD 212 million.
When the fully drawn component of our facility is excluded, we had cash balances of AUD 273 million at the end of the half. In terms of our net cash position, it is AUD 56 million lower than the prior corresponding half-year period. As I mentioned earlier, net cash flow generated was AUD 10 million favorable for the corresponding half. So the net cash variance was driven by factors in the second half of FY 2023, including the special dividend that was paid May 2023. The lines in the bottom chart depict net cash across first half 2024 and the prior period by day. First half 2024 is depicted by the orange line, and it demonstrates the net cash variance declining as the half 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.
In fact, the group operated in a right-of-use assets or only eight business days during the first half. Clearly, we have a significant headroom in liquidity both on balance sheet and within our existing facility. Our ABL financing still has over one and a half years to run, and we remain pleased with how it is supporting execution of our strategy. This slide demonstrates the strength we have built in the balance sheet over a number of periods, which has supported an increase in investment on key projects to drive future value, and it has supported the ongoing frank dividend distributions to our shareholders.
So before I hand back to John to summarize, the first half saw us face into a challenging consumer environment, but the improvements to our customer value proposition saw us deliver comparable sales growth despite cycling very strong sales in the comparative period, first half 2023. While the macro environment, inflation, and store closures impacted earnings, our focus on costs, cash generation, and maintaining balance sheet strength have assisted in navigating this period and allowed us to gradually increase investment in key projects such as our supply chain capability and the store investment program, which will deliver benefits in future periods. We have a strong inventory position with improved availability, and we are well placed to take advantage of opportunities moving forward. Thanks, John.
Thank you, Matt. Apologies once again for our line. It dropped out there for a minute. Anyway, we're back on track. So moving to slide 18.
We believe we're well positioned in the current environment but also in terms of future opportunities, in terms of maximizing those. So over the last number of years, we've repositioned the business underpinned by our Customer First Plan. We've transformed customer satisfaction and brand trust, now sitting in the number eight position in the top 10 most trusted brands in Australia, considering we were 28 in 2019. We've reframed our merchandise strategy. We've undertaken strategic floor space reductions. We've executed a multi-channel step change, and we've strengthened our balance sheet, refinanced it, and built a strong cash position as Matt just outlined. We believe we have unique strengths to provide customer value and give customers a reason to shop with us. We have a market-leading loyalty MYER one, with 4.3 million active members and a 76.2% tag rate.
Leading multi-channel capabilities, one of Australia's broadest merchandise offers with less reliance on seasonal or fashion trends. We offer gift cards, other business partnerships, which create a unique ecosystem to build future delivery. And finally, we can continue to invest strongly behind long-term value levers. Our National Distribution Centre investment will drive savings into FY 2025 and enhance multi-channel customer experience. We continue to invest in new brands with scale, including, as we mentioned, CRG and Brandbank, with others ramping up too, making the big brands bigger is a key part of that strategy. And over the last six months, we've invested AUD 13 million of digital and technology investments with a focus on future growth levers. It is for these reasons that Myer is a more robust and resilient business than when we started the Customer First Plan and is well positioned to face the current environment.
Moving to slide 19. The Customer First Plan is all about our customers and how we are generating greater connections with them. So to the first box, we're creating a more connected staff member. Through the rollout of more than 2,400 new POS devices in store, we're improving transaction speeds and effectiveness of that transaction, with times being reduced by 20%, meaning a better and faster customer experience in store. We've completed the rollout of over 3,750 Zebra mobile devices for our team members, shaping the future for our team and enabling them to be data-driven and digitally connected with the introduction of brand new applications, significantly enhancing customer and team member experience and engagement and delivering efficiencies for us as a business. As mentioned, we are continuing the development of our leading team member app and M-Metrics to provide greater customer and brand analytics.
We're also unlocking data to fuel our growth. We're doing this by continuing to invest in partnership, Pay with Points, and loyalty programs to drive greater value for customers and also provide us with additional revenue opportunities, which is a completely strong point of difference and a reason to shop at Myer. In addition, we're investing in AI and machine learning with more than 35 models in place currently to drive greater automation and personalization. To the last box, we're enhancing the customer experience by investing in those in-store experiences, customer service, and elevated store environments. We are continuing to improve our online experience and fulfillment speed and capability through services like Metro to Metro, next-day delivery, and the introduction of our NDC, which will significantly improve the way we stock our stores as well. Moving on to slide 20.
Our supply chain capability is starting to scale and will provide significant future benefits for many years to come. Since I started, we focused on what a re-envisioned supply chain ecosystem would entail. I'm pleased that we are now about to see this rollout with the introduction of NDC, which will commence scaling from the end of March 2024, and the introduction of our new Queensland Distribution Centre, Wacol, which will go live at the end of financial year 2024. The introduction of our NDC will create a step change in profitability and efficiency for the business, providing a new and more efficient way to deliver stock not only to our customers but to our stores. Leveraging state-of-the-art technology, maximizing our sales opportunities by allowing us to optimize stock to the areas based on customer demand and, in turn, reducing lockdowns and further aiding in tightening our inventory management.
The enhanced capability from this fulfillment perspective will also ensure a faster and more effective service to customers and a more efficient model underpinning profitability of our online growth channel. Moving to slide 21. Our continued investment in technology and store infrastructure, again, will unlock future growth. Key areas include the ongoing focus on transformation across technology in the business, new point of sale software, which will further improve transaction times in both the team member and customer experience. We're rolling out a new finance system, ERP, which is due to complete in FY 2025. As we said earlier, our continued investment in the M-Metrics app is underpinning this growth in in-store customer satisfaction. We'll continue to make improvements to our store network, including further upgrades of beauty halls in selected stores, new fixtures for cosmetics, including display cabinets to aid with shrinkage, which is a major area of focus.
As previously touched on, we have right-sized our store network with 14.1% of total space reduced since first half 2018 and now with a WALE of 8.9 years as of January 2024. This provides a strong foundation for productivity across the network. Slide 22. Our Customer First Plan has driven significant value creation and continued to evolve. As mentioned, the plan has yielded significant improvements to all aspects of the Myer business, and the output of that progress is tangible improvement in some of the key metrics shown on this page. If you look at where we were in first half 2018 to first half 2024, total sales go from AUD 1.7-AUD 1.8. Online sales mix has increased from 7%-21%. Cost of doing business has decreased from 31.2%-30.2%. NPAT has increased from AUD 40 million-AUD 52 million.
Net cash has improved from a debt position of AUD 20 million to a net cash position of AUD 212 million. Dividends were suspended and not being paid when the plan started. AUD 0.03 per share delivered for the first half this year, fully franked, and reduced based on more than 14%. The tag rate has increased from 67.5% to 76.2%. Back when we started this plan, we said put the customer first, and each and every Myer team member has focused on that since that time. We've also said we're about delivery, not promises, and the results above demonstrate the focus each and every team member has had on delivering our plans. All our team members have been critical in delivering this plan, and I thank them for that.
It's their work that has stabilised and transformed this business, delivered shareholder value, and has put the business in a strong position to look at the growth opportunities going forward. Before we conclude on slide 24, I just want to touch on current trade. Like all retailers, we continue to remain cautious about the macroeconomic environment. However, we've been encouraged with our results for the first six weeks of the second half, which have delivered comparable department store sales growth of 4.9% versus the previous year, so improving from where we left off at the end of the first half. Despite the headwinds, we will retain a strong focus on profitable sales, cash, and cost, and we have strong programmed deliverables to roll out during the half as part of our Customer First Plan.
So in conclusion, on slide 25, our Customer First Plan has been and continues to be the right plan as underpinned our results during the challenging consumer environment of recent times. Strength of the business supports the declaration of an interim fully franked dividend of AUD 0.03 per share, utilizing our significant accumulated franking credits. We will remain cautious, however, about the ongoing pressure on the consumer, but we are confident in the robustness of our plan and the initiative still to come, giving customers many reasons to come and shop at Myer. Finally, as this is my last results call, I want to thank all our shareholders, team members, brand partners, and suppliers, but above all, our customers for their ongoing loyalty to this great business and their support of me during my time as CEO of this great company.
It's been an absolute honor to lead this business and to be able to work with all team members to put it on the right footing for the future. But before I open the line for Q&A, I just want to address our leadership changes announced by our board today. As you know, we announced last June that I'd be standing down as Myer CEO and Managing Director, second half of 2024, financial year 2024. We've now advised the Australian Securities Exchange and the Myer Board has appointed independent non-executive director Olivia Wirth as executive chair to drive the company's next phase of growth, provide Olivia with the best opportunity to lead the board and drive the strategy, and thank Chair Ari Mervis, who will retire from the board, effective today to allow him to focus on his other board responsibilities.
Olivia, the former CEO of Qantas Loyalty, will chair the board from today and assume the Myer CEO and MD responsibilities in June after I depart. Olivia is a highly accomplished executive and has already made a significant contribution as a board director. As a Qantas executive, she transformed Qantas Loyalty into one of Australia's largest and most successful omni-retail businesses. I know Olivia will bring a laser focus to customer service, loyalty, data analytics, online shopping, team engagement, and a rewarding in-store experience, all key focus areas of our Customer First Plan. Since joining the board, Olivia has visited stores with myself and my exec team, met team members, and engaged with our loyal customers on the shop floor. I've worked closely with her during this time and have been deeply impressed by her hands-on approach, commitment, and passion for the business and support for our team.
As an incumbent board member, we are very confident she'll hit the ground running as Executive Chair. In further changes, the board has also appointed current independent non-executive director, Gary Weiss AM, as Deputy Chair and Lead Independent Director, a new role created to enhance corporate governance. We're also pleased to announce the promotion of current EGM of stores, Tony Sutton, to the new role of Chief Operating Officer, reporting to Olivia. Given his 30 years with the business, many of you will know Tony well and will want to congratulate him on his appointment and broader arena as COO. To support this leadership transition, I'll remain with Myer until early June, as previously advised.
On behalf of the board, executive team, and all Myer team members, I'd like to thank Ari for the contribution he has made to the business, particularly on the delivery of the Customer First Plan, and wish him all the very best for the future. These changes are a great outcome for our business, provide continuity and stability, but also set us up for the next growth phase of the business and the Customer First Plan. Thank you, and we will now open up for questions.
Thank you, John. 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 Mark Wade with CLSA. Please go ahead.
Hi, guys. Thanks for taking the questions. Look, thanks, John, just at the onset for everything you've done for the business and stabilizing and turning around. So congratulations.
Thanks, Mark.
Yeah, first question. Just on the executive chair appointment, I mean, there's no doubting Olivia's merit, but it seems contrary to ASX or it is contrary to ASX governance practices to have an exec chair when she'll be independent. So what can't she do or the company do by just being a standard CEO?
Well, I think the board felt that this was the most appropriate structure for our business at this time, and hence the reason why we have Gary appointed as deputy chair and senior independent director. It's a structure that's in other parts of the world, and the board felt this was the most appropriate structure for continuity and as exec chair to hit the ground running over the next few months while I hand over. And we think it's the most appropriate and effective way of having transition in our business for the next phase of our growth.
And Ari was supportive of that move?
Yes.
Okay. Good to know. All right. Well, changing tactics on the National Distribution Center, can you explain or tell us what might be some of the expected benefits of that? I mean, we've heard conceptually in the past about reducing the cost of parcels, etc., but can you elaborate on the benefits of the NDC?
Yeah. I mean, obviously, it'll ramp up over time. We're just starting to use it now, and we got the final bit of approval yesterday, so we're ready to ramp up now over March and then into April. So we'd expect to see the initial phase will be taking online orders fulfillment out of stores and into the NDC. We believe that we'll start to see savings sort of circa sort of AUD 5 million as we ramp up, potentially getting as high as AUD 10 million. And then the next phase, which will be later in the calendar year this year into next year, will be the store stock replenishment, which will allow us to have a pull system, which means the stores will pull the stock as they sell it as opposed to us pushing it out to them, which allows then for a more efficient sale.
So it means that the stock goes to the right place, which will, as I said in the presentation, reduce markdowns, improve stock turn, and also reduce inventory. So it's all about magnitude. So we're saying five-10 over the next few years, but over a longer period of time, it will be significant.
I'll just also add, Mark, that the volume's also going to come out of our current 3PL facility as well as stores into that NDC as it ramps up over time.
Okay. Got it. Got it. All right. Well, thanks again, John and Matt. Thanks again.
Thanks, Mark.
Thanks, Mark.
Once again, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. Your next question comes from Shaun Cousins with UBS. Please go ahead.
Good morning. And I echo Mark's comments. Thanks, John, for the engagement. And the Customer First Plan has been very effective, and well done. Maybe just to touch on some of the commentary you made around talking about your revenue performance, the market share gains that you've seemed to have achieved, and also not only in the first half but the strength of the first six weeks. Where do you think you're getting those market share gains from? Is it from other department stores, or is it broader apparel retailers? I'm just curious if you can sort of identify where you believe you may be getting those from.
Yeah. I mean, as we said, it was a piece of work commissioned against the top 200 discretionary retailers. So I would imagine we're getting it from across them. So whether they're department store or specialty, certainly, some of the feedback we get from brands, particularly in recent weeks, is that we are performing better than some of their own standalone stores and certainly the other department stores. So I think it's a combination of all of those. And I think, to be honest, it just underlines the power MYER one. if you're going to go and buy a brand that's available in two or three department stores or two or three online or specialty, you're going to go actually, if I go to Myer and buy that product there, I'm going to get some benefit.
I think when the consumer has got cost of living pressures and their discretionary spend and their discretionary power is diminished, then they're going to be very careful about where they choose to buy. I think we give them a reason to shop with us, which is our MYER one program. You look at the penetration, about 76.2%. That's over three-quarters of our customers we know of our sales are through MYER one customers. We've seen it go as high as the mid-80s and 90s when we do special weekends, particularly around the beauty area. I think it's really that. It's across so to answer your question, it's across those top 200, and MYER one is driving it, no question.
Great. And my second question is sort of the exec chair appointment MYER one. given Olivia's background from Qantas and loyalty there, is the expectation MYER one becomes a bigger, I guess, sort of part of the business and not only as a way to sort of access customer revenue in the Myer store but to build incremental revenue streams? I'm just curious around you've got this engaged customer. Can you monetize it more? And is that something that Olivia's going to bring her skill set there to really help sort of amplify that and drive that?
Yeah. Look, I think we've got a fantastic team under Geoff on our loyalty team that we won four awards globally last year. We're nominated for the top four awards globally again this year, beating people like Starbucks, etc. I think what Olivia will do is bring additional knowledge and focus because bear in mind, the airlines were the first people to launch loyalty. They were at the cutting edge of it. So therefore, we're going to be a fast follower of some of those best practices. And for us, if we look at the Customer First Plan, my job when I came here was to fix the basics and retail 101 and get us back on track. We've done a lot of that: space reduction, new merchandise offer, multi-channel offer, focus on the customer.
Where the Customer First Plan goes next is the investment in technology for our team members on the store to provide a better experience for our customer, technology for our customers to make it easier to shop with us, and also to drive loyalty. And as we said, we have some revenue streams already with our payment points programs and our partnerships, but we can really leverage that. And we believe MYER one will be a significant part of the growth story here over the next few years.
Great. And just my third question, Matt, just regarding shrinkage. Just maybe where are we at now relative to pre-COVID? Are we sort of in line with there, or are we still running a wee bit above pre-COVID levels of theft in store places?
Yeah. We're still above, Shaun. So there's still opportunity there. And ultimately, it remains well above where we're targeting as a business going forward. So that's why I said it's an area of opportunity. We're starting to see some green shoots, but that's not paying through the P&L just yet. It will in time.
And I think, Shaun, just to add to Matt's point and to give you a bit of a global perspective, typically, pre-pandemic, etc., shrinkage runs at 1%-2% of all retailers, tends to err towards the higher of that range for department stores. If we look at, we're somewhere in the middle of that. We've had it down as low as 1.1, we think, is world-class, and that's where we're targeting. We've seen it stabilize over the last six months with initiatives that we've put in place, but they take sort of six to nine months to resonate with the consumer. But if you look at recent data out of the NRF in 2023, average shrinkage was at 1.6%. So we're just under that. But for us, really, the focus is to get back down to about 1%, which we believe is best in class.
Fantastic. Thanks, John. Thanks, Matt.
Yes, Shaun. Thank you.
There are no further questions at this time, and I'll hand back to Mr. King for closing remarks.
Thank you all for listening in, and thanks for listening in for six years. So it's goodbye from me, and it's goodbye from Matt. And we'll see you soon.
Thank you.
Bye-bye now.
Good. That's concluded our conference for today. Thank you for participating. You may now disconnect.