Thank you for standing by, and welcome to the Myer Full Year Results 2022. I would now like to hand the conference over to Mr. John King, CEO. Please go ahead.
Thank you, Ashley. Good morning, everybody. Apologies for the slight delay, t here were some technical issues getting the ASX up today, so hopefully you all have the presentation. Thank you for joining the call today to investors and analysts and also to media who joined on a listen-only basis. I'm John King, CEO of Myer, and I'm joined today by Nigel Chadwick, Myer's Chief Financial Officer. Please note that this call is being recorded. Before going any further, I would like to take a moment to recognize the various traditional lands on which we do our business today, as well as acknowledging elders, past, present, and emerging. To the agenda for this morning. I'll begin with an overview of the FY 2022 results, then I'll hand over to Nigel, who will provide you with more details on these results.
I will speak further on our Customer First Plan, which is the strategy we outlined in September 2018, which continues to gain momentum and underpin everything we do. After that, there'll be an opportunity to ask questions. let me take you through the key financial takeouts from today on page four. I'm pleased to report on these results today. We emerged from the impact of the pandemic with a better, stronger, and more agile organization that is well-equipped to meet the demands of today's consumer and beyond. While the last few years have been disruptive to our people and our business, it has created an opportunity for Myer to adapt and grow in a new environment. We have delivered strong sales growth, up 12.5%, with comp sales up 15%, demonstrating growth in a non-lockdown environment.
Online continues to outperform, delivering an outstanding 34% growth, and importantly, outperforming our competitors. We're pleased to report that NPAT result is AUD 60 million for the full year, a 104% increase from last year when adjusted for JobKeeper. This included a record second-half NPAT figure, the best since financial year 2013, demonstrating the bottom line output of progress we have made in the business operations. The Customer First Plan, implemented in September 20th, 2018, has yielded significant improvements to all aspects of Myer, and the output of that progress is a tangible improvement in some of the key metrics shown here on the slide. Our balance sheet is strong, with AUD 186 million in net cash position, which supports a strong return to shareholders via a franked dividend. To page five, I will talk about how we've seen strong growth and clear momentum.
Comp sales were up 15%, demonstrating strong growth across both our store network and our online business. Despite the disruption throughout the year with Omicron, particularly in the early part of the year, our store network has contributed growth with comp sales up 8.9%, driven largely by stores outside of CBD locations with over 10% growth. Our CBD locations have also returned to growth, albeit much more slowly, as travel and workers start to return, for we still see some major upside there in the future. Our group sales results for the second half of 2022 represent strong growth from prior year of over 20%. This was the first half that we didn't have impacts from mandated lockdowns. This second half exceeds the FY 2019 results before the pandemic by 11.5%.
Importantly, we're not only demonstrating growth from pre-pandemic periods, but we are taking market share. In FY 2022, we gained 110 basis points on last year based on the Mastercard Commission report comparing Myer to the retail industry. Online growth. The facts behind our online business are sometimes lost in the coverage of the day, but the growth we are seeing means we are outpacing our peers and competitors. Meaning that we are now one of the largest online general merchandise retailers in the country. To demonstrate this, the chart on the left outlines our growth against at the ABS non-food retail trade index-backed pre-pandemic levels. Our growth has outperformed the market by nearly 28% since 2018.
When we again look at our Mastercard commission data comparing online sales only, our market share in FY 2022 grows by a staggering 191 basis points, meaning we have now had considerable growth in market share for both in-store and online channels. To the right of the page, when talking about how we're outperforming the market, our total growth of 38% has outpaced brands like David Jones and online-only marketplaces, Kogan and Catch. The interesting aspect is when you look at our category level when compared to specialist retailers. For example, if you take our home category, which has grown at 53% in FY 2022, this has well surpassed the growth of pure plays like Temple & Webster at 31% and Adairs at 4%.
Even when you look at our beauty category, our 17% increase continues to outpace pure plays, again, like Adore Beauty, who grew at 11%. The online story over the last four years is compelling when you look at our key metrics. As we mentioned, the growth has been exceptional and this has not been isolated for the last year. Our CAGR since pre-pandemic FY 2018 has been 36.4%. We have some exceptional highlights when you look across these key metrics. The scale of the sessions and unique customers visiting the sites has grown considerably. Our efforts across building experience has led to huge improvements to conversion rate and NPS respectively. Finally, we have fundamentally changed the MYER one journey on the website to ensure we now capture over 70% of all transactions within our MYER one program, up from 53% in FY 2018.
This ensures we create a stronger link with our customer, rewarding them more and driving greater frequency and lifetime value. Furthermore, we see considerable opportunity going forward in our digital business, enabled by a number of key initiatives, including our national distribution center investment, which will step change our economics online by facilitating a better customer experience on delivery, range, and flexibility. Our marketplace offering, which will broaden our range continued enhancements to the user experience at checkout, and further enhancements to our return on investment performance marketing spend. In terms of our omni-channel strategy, while we're excited by our online performance and opportunity, it is just one component alone of our omni-channel retail strategy. The bottom line is that customers want to shop across multiple channels, not just online.
They want to come to our stores, they want to buy from us online, and they want the experiences offered in store, and they want the ability and the flexibility to choose. In our view, the convenience of having both channels at our disposal has been demonstrated throughout the pandemic period with the balance of high online growth during lockdowns, but when out of lockdowns, the return to in-store shopping and the experiences within our stores. We know from looking at our data that our omni-channel customer is more valuable. They spend more per customer, they are more engaged, shopping more frequently, and more engaged with our brand, and more loyal than our single channel customers. The ability to have online and in-store is complementary.
Not only do customers visit our website before they come in store, we have an increasing number wanting to leverage our click and collect offer for online orders. This not only provides greater convenience for our customer, but also an opportunity for customers spending again in store when they pick up their parcel. This slide sums up clearly the strength and competitive advantage we have through the benefit of having a multi-channel offer. On page nine, the growth we're seeing is underpinned by our MYER one program. The role of first-party data is incredibly important in today's marketplace, and we have reaped the benefits from our MYER one program with over 71% of all purchases using a MYER one card, our highest on record since publicly listing in 2009.
The program now stands at over 6.6 million digitally contactable members, meaning it has significant scale, but also is highly contactable. Importantly, one of the key areas when we assess the power of our loyalty program is not by the top-line number, but by the number of customers who are engaged with us at any one time. That is why our 3.7 million unique active customers, being those that have spent with us in the last 12 months, is what makes this one of the standout loyalty programs in the country. We have been actively building engagement and acquisition, with 593,000 new members signed up in the last financial year, 2022. Pleasingly, we are seeing a significant shift to the younger demographic, with over 55% of all new signups in the 18-34 age group.
Our loyalty program is one of the most rewarding in the market, and our MYER one customers spend 83% more than a non MYER one customer. It is a compelling foundation for our business and one that will continue to underpin growth for our business as we leverage better insights to inform better business decisions by us, deliver greater insight and support for our business partners, provide a strong and actionable database to commercialize further, and importantly, maintain and deepen the connection with our most loyal customers. Now to page 10. The profitable sales growth has led to the best second half results to page 13 with a return to dividends. Our relentless focus on profitable sales has seen significant momentum across the bottom line, particularly when you have less impacts from mandated lockdowns.
Our second half not only delivered strong sales growth in both store and online channels, it translated to our strongest result in almost 10 years. We are buoyed by the strength of our multi-channel capability. The structural improvements we've made through our Customer First Plan are continuing to be realized. Importantly, we continue to deliver the significant momentum despite disruptions. The quality and sustainability of the results have given the board confidence to declare a second half dividend of AUD 0.025, meaning a full-year dividend of AUD 0.04. As you would know, earlier this year, we reinstated the dividend for the first time since 2017. To page 11. I'd just like to touch on how we have emerged from the pandemic stronger on all key metrics.
While we're pleased with the quality and the quantum of earnings, it's the quality of the earnings that are also important to us. Our earnings now feature higher levels of sustainability and quality than previously. The plan has yielded significant improvements to all aspects of Myer, and the output of that progress is tangible improvement in some of the key metrics shown here on this slide. Our online business is now almost a quarter of sales and growing ahead of the market. We continue to strategically reduce floor space where it makes sense and have reduced space by 11.1% since the launch of the Customer First Plan in financial year 2018. Our merchandising improvements are paying significant dividends, both in terms of customer trust, brand engagement, and financially through a significant reduction in clearance in aged inventory. Our cost base continues to permanently reduce enhancing margins.
At the bottom line, we've generated our strongest net profit since the second half of 2013 and given ourselves balance sheet flexibility to pay a dividend. I'd now like to hand over to Nigel, who'll go over the results in more detail. Nigel?
Thanks, John, and good morning. If we could move to slide 13, please, the income statement. Overall, considering the disrupted trading environment in parts of the year, this is a really strong result and reflects the continuing progress we've made over the last four years with the Customer First Plan. As a reminder, I'd just like to mention that this year is a 52-week year compared to 53 weeks last year. There's a comparison on a 52-week basis included in the appendices for anybody who's interested. Onto the P&L. Clearly, total revenue and GP were severely impacted by the temporary closure of various parts of the store network in Q1.
In total, we lost 2,463 department store trading days, or 11.4% this year compared to 2,067 trading days or 9.4% last year. While first half total sales were up just over 8%, we finished the year with sales up 12.5% following a strong second half, which was up nearly 17% on FY21, which of course included some store closures. In terms of comparable sales, which exclude periods where stores are closed or under refurbishment from both years and the 53rd week in FY21, a strong second half, sales finished the year with a 15% increase following a 17.8% increase at the half year.
Sales growth resulted in strong operating gross profit growth, which was up 8.5%, and we'll discuss that in a bit more detail in a couple of slides. After adjusting last year for the net JobKeeper benefit, cost of doing business, or CODB, increased at a slower rate than OGP up 6.9%, mainly reflecting inflationary pressures and variable costs in online fulfillment. Support was received from landlords in the form of rent waivers during lockdown periods in the first quarter, totaling AUD 18 million, which is approximately the same amount recorded in the FY 2021 year. That brings us to EBITDA, which again, after adjusting for the net JobKeeper benefit in the prior year, was up 11.6% to AUD 400 million for the year on a post-AASB 16 basis or AUD 187.5 million on a pre-AASB 16 basis.
Both of these qualities before implementation costs and individually significant items. From a store performance perspective, we had just two stores that were EBITDA negative, and obviously, we have plans in place to improve their performance going forward. Depreciation was down slightly, reflecting lower net CapEx spend in recent years, offset by a small increase related to changes in the lease portfolio. Net finance costs were up AUD 2 million, reflecting the write-off of capitalized borrowing costs related to our old facility, while interest on leases was flat. The bottom line was a net profit after tax, but before implementation costs and ISIs of AUD 60.2 million, which is at the top end of the range we advised in July and compares to AUD 29.5 million last year after removing JobKeeper.
Given the first half impact before implementation costs and ISIs was AUD 32 million, this means 2H delivered AUD 28 million. As John said, this is the best second half since 2013. Implementation costs and ISIs were mainly related to space exit costs and associated residual asset write-offs, such as Blacktown and the recently announced Frankston closures. Statutory profit was AUD 49 million compared to AUD 46.4 million last year. On the right-hand side of the slide, you can see our mix between private label, national brands, and concessions, which after two years of disruption from COVID, have returned to almost identical levels as FY 2019. John will cover our category mix and the sheer scale of some of these businesses a little later. Moving on to slide 14, operating gross profit.
As you can see from this slide, OGP finished the year up nearly AUD 90 million or 8.5%. With OGP margin at 38.3%. As you can see, volumes contributed a AUD 138 million improvement, reflecting the higher sales revenue for the year. Rate deteriorated as we took higher discounts on seasonal products following lockdown periods and lower foot traffic in late December and January from Omicron. In addition, we deliberately exited seasonal inventory at the back end of the year to ensure we positioned ourselves well for the spring season intake. Rent was also impacted by increased freight costs, primarily in getting our private label brands from the manufacturers to Australia. In the other costs bar, shrinkage has increased by nearly AUD 11 million- AUD 28 million for the year, and now sits at similar levels to FY 2019.
Shrinkage now stands at 1.2% of wholesale sales, having been driven down to below 0.9% over the last three years. Obviously we are reviewing what actions we can take to drive this back down. In addition, we incurred higher MYER one costs, reflecting the improvements in the MYER one tag rate and lower reward card threshold, offset in part by higher non-redemption of gift cards and a small year benefit from FX and improved supplier support as purchase volumes increased. Lastly, we also had a small negative movement in margin rate from a mix shift to concessions. Moving to slide 15 and CODB.
On slide 15, we've excluded the net JobKeeper support out of the prior year numbers, but we have not adjusted rent waivers as the amount received this year, as I said earlier, were almost the same as those recorded last year at around AUD 18 million. CODB has increased 6.9% over the prior year. This compares though to revenue growth of 12.5% and OGP growth of 8.5%, demonstrating operating leverage on our cost base, which is growing at a slower rate than gross profit. As you can see from the waterfall, principal areas of increase were inflation, mainly in the form of higher wages both in store under our EBA and in the support office, where a pay increase was given for the first time in several years. Store operating costs such as light and power and other outgoings.
Variable costs in our online business grew in line with our online sales volumes, driven by fulfillment and central support. We also incurred higher store project costs from movement of product adjacencies and OpEx elements of store upgrades, as well as higher COVID costs, reflecting more store closure days and locations. These costs were offset by reductions in store occupancy costs, largely associated with space reductions. Moving to cash flow on slide 16. As you can see from this slide, we've had a very strong cash flow performance during the year, with operating cash flows before interest and tax, improving AUD 22 million- AUD 387 million. As noted on the slide, FY 2021 also included AUD 58 million of net JobKeeper cash receipts.
Excluding those, cash flow before interest and tax improved by AUD 80 million, which makes this year a really terrific outcome off the back of the improved sales and margin achieved. Further down the cash flow statement, you can see we moved from a tax refund in FY 2021 for paying tax in FY 2022, making operating cash flow after interest and tax almost the same year-on-year. Again, if JobKeeper is excluded from FY 2021, then this year has outperformed last year significantly. Cash CapEx, net of landlord contributions, was up from last year, but still at a relatively modest level of AUD 44 million, with the bulk going into our store network supported by contributions from landlords.
As well as refurbishments, we've been deploying new back of house technology to enable quicker fulfillment and stock tag processes, and also deploying new point of sale hardware to mitigate the risk of POS failure and improve the customer experience through much quicker processing. We've also continued to invest in our online platforms and of course, our national distribution center, which is currently being kitted out with state-of-the-art robotics. We expect CapEx to continue to increase in FY 2023 to something in the range of AUD 60 million-AUD 80 million net of landlord contributions as we continue to invest in the store network to improve the customer experience and update some of our older infrastructure, continue to improve our online presence, complete the rollout of our new point of sale system, including new software, and of course, complete the NDC. Moving to the balance sheet on slide 17.
The noteworthy items here are total inventory, of course, at year-end was up AUD 66 million or 21.7% year-on-year. While department store stock on hand was up just 9% from abnormally low levels in the prior year when we curtailed intake. Stock in transit was up AUD 35 million due to a deliberate decision to accelerate intake this year in response to global supply chain concerns. The bulk of the year-on-year increase was actually in stock in transit, which in turn has positioned us extremely well going into the spring season and for the remainder of the first half of FY 2023. John will update you shortly on how that is translating into a strong start to the year.
To give you a sense of relativity, total inventory is only up 7% from FY 2019 levels despite the pull forward of intake this year. In addition, the charts on the right display the health of our inventory, with the percentage of clearance inventory being the lowest we can find on record. Inventory over six months old also at healthy levels and predominantly in non-seasonal staples that are less sensitive to age, such as cosmetics and homewares. Right-of-use assets are down by nearly AUD 50 million, mainly as a result of depreciation and space handbacks at Blacktown. Fixed assets are down, reflecting depreciation again and store exits during the year. Finally, net cash.
Again, we finished the year in a positive cash position of AUD 186 million, which is up AUD 74 million from last year-end, and I'll talk more on that on the next slide. Turning to slide 18, debt and liquidity. Really, I should be saying cash and liquidity, these days. On this slide, you can see the progression of our net debt or net cash balance over the last few years and the repair of the balance sheet. We've gone from over AUD 100 million of net debt at the end of FY 2018 to finishing this year AUD 186 million net cash positive. Given we have a fully drawn component of our debt facility of AUD 65 million, that means we had cash on hand of over AUD 240 million at year-end.
In the bottom chart, you can see where our net cash position has been across this year and last. We've only been in a small net debt position for a total of 17 business days during the entire year, and these were all in the first half. Peak net debt was just AUD 41 million compared to AUD 30 million in 2021 and AUD 210 million in FY 2020. Last year, we were only in net debt for a total of 15 business days. Across the last two years, we've only had net debt for a total of 32 business days. Our current expectation is that we'll go through this year's peak financing period in November in a net cash positive position. Clearly, we've got significant headroom and liquidity within our existing facility and on balance sheet.
Our existing facility's got over three years to run and is working really well for the business. I think it's reasonable for us to now claim that our balance sheet is rock solid and has been all year long. This underpins both a gradual increase in reinvestment in the business and a return to franked dividend payments. Before I hand back to John to summarize, we've had our first non-COVID-interrupted half year since 2009, which allows us to see how the underlying business is traveling under the Customer First Plan. Importantly, this has resulted in the best second half profit since 2013. Our balance sheet and liquidity is rock solid and underpins future reinvestment in the business and our ability to pay franked dividends.
We're continuing to invest in key aspects of the Customer First Plan, including growing our online business, further improving our in-store customer experience, and strengthening both our fulfillment and store networks. Our omnichannel approach to market is a significant asset, which allows our customers to switch between channels to suit their shopping preference. Finally, our unrelenting focus on costs, cash, and our balance sheet will continue to be top priorities, and we are well positioned to take advantage of the peak Christmas trading period. On that note, I'll pass you back to John.
Thanks, Nigel. Excuse me. If you could turn to page 20, I'd just like to touch on the progress that we've made in the Customer First Plan, which means we're well placed to drive what we believe is significant value creation for all shareholders in the future. The plan has provided us with a strong foundation for the business and it's delivered in a number of areas. Our outstanding online growth, we're now well on our way to our AUD 1 billion annual revenue target. The acceleration of our fulfillment and supply chain capability when our national distribution center opens in the second half of 2023. The improvement in the customer experience, both in store and online. Our customer satisfaction metrics have increased to 82% this year from 70% in the first half of 2018.
A very healthy inventory profile, improved stock turn, making the big brands bigger and turbocharging key categories, more of which a little bit later. A strong focus on the reduction in space, improved productivity of floor space, and the strategic refurbishment of stores. We've right-sized the store support office, and of course, we continue with our disciplined approach to management of costs and cash, as Nigel says, providing our strongest balance sheet in recent times.
The delivery of this program will continue to underpin the future growth of this business and allow us to further unlock greater shareholder value, particularly as we continue to look to scale and deliver a market-leading online business and continue to build our loyalty offer and seek more opportunities to commercialize this program, as we have seen with CommBank and our recent announcement this week with Velocity, which I'll talk about shortly. Turning to page 21, I'd like to touch on one of our key focus areas, our NDC, National Distribution Center. As we said, it's on track to open in the second half of 2023. This will fundamentally change the way we manage our factory to customer operations, both for in-store and online. From a store perspective, it will drive better inventory management and will deliver greater sales, lower discounting, and improved margins.
For online, it will improve the speed and the cost of how we fulfill orders for our customers. The NDC will be central in delivering future capacity and efficiency as we get close to the aspiration of over AUD 1 billion of annual online sales. The facility itself will be a state-of-the-art complex featuring significant innovation with more than 200 autonomous mobile robots, or AMRs, as we call them, to ensure faster order processing and delivery time frames, and will be the largest implementation to date of the Geek+ RS8 shuttle system in the Southern Hemisphere. I think this is a great example of how Myer is modernizing for future growth. Next focus area for us is our loyalty program and our partnerships. We are looking at new and expanded partnerships to help build our Myer One program.
Leveraging these partnerships are and continue to be important as they provide a new source of customer growth, significant revenue streams to both in-store and online, plus another opportunity to engage and to build loyalty. Our Points Plus Pay program is one of the most significant in Australia. It allows us and our partners to leverage Myer's unique offer of Australian and international brands across a wide range of categories, a large national footprint, and a dynamic online business. At a time when we see Australians wanting to make their dollar stretch further, this allows them to leverage their points program with Myer and provides even greater value to us and our partners' customers. Leveraging the rewards currency will be an important differentiator if economic conditions continue to change.
This also set the foundation for a deeper strategic partnership with two of Australia's most recognizable brands, being CommBank and Virgin. For us, it further enhances our loyalty program. It captures greater brand preference and demonstrates why we are the ultimate one-stop shop for Australians. Turning to page 23, just like to talk about another focus area for us, which is becoming the destination for growing brands. Over the past four years, our merchandise offer has been changing. We now have a well-balanced offer with significant sized businesses across womenswear, menswear, home, and beauty in particular.
This is compelling as it not only demonstrates the size and scale we have when compared to specialty retailers, but also demonstrates the resilience we have by having a more balanced offer, allowing us to move quickly and capture changes in customer trends and emerging markets, while also being less susceptible where certain areas face headwinds. Our merchandise offer is the strongest it has been. With clear focus on inventory management, many of our customers are shopping more newness than ever before. The last season alone, we have announced over 30 new brands across home, fashion, intimates, and beauty portfolios. However, the strength has been our focus on making the big brands even bigger. This has been done with our renewed focus on working with brands in a partnership approach to achieve long-term strategic commercial success, and that is why we're seeing more and more brands choose Myer.
An example in womenswear, we launched intimates label Simone Pérèle into selected Myer stores across Australia and online from February this year. We also announced the return of Bendon Lingerie, who came back to Myer in August with their stable of brands, including Pleasure State, Me by Bendon, and heritage brand, Fayreform. These strategic additions will cement us as the leading intimates retailer in the country. We've also moved to announce other brands like American Eagle, Aerie, Thrills, and many more to come, reflecting our changing customer base. In beauty, our designer brands, including Chanel, Dior, Tom Ford, have been star performers. Recently, we've launched Gucci Beauty and Hermès Beauty, which are proving incredibly popular with our customers. The Myer Perth Beauty Hall was refurbished with new counter designs, showcasing our range in the best way.
Myer Melbourne opened global first counters for Estée Lauder, M·A·C, Bobbi Brown, and Hermès, with further exciting new counters plans to open later this year. With a healthy inventory position and new brands, we are ensuring newness for our customers and delivering on our aim of making the big brands bigger and ensuring more and more brands are choosing Myer. In terms of our other focus areas, this is where using our strong balance sheet to invest really helps us. We've outlined a significant investment in our supply chain and online. However, we've continued to invest into our stores, our biggest channel.
As part of this, we've embarked on the biggest store technology transformation in recent history. The 18-month transformation will deliver new points of sale to all stores, a new one device strategy to underpin store operations and continued investment into our leading proprietary M-Metrics team member platform, which allows our team members to serve our customers better. We are continuing to improve and curate our store experience with major refurbishments completed at Toowoomba and Albury, and the relaying of Chadstone, Fountain Gate, Carindale and Adelaide City, with further optimization plans for another 17 stores in the works for the rest of FY 2023. Our focus on delivering an optimized store network is still well on track with 11.1% of space reduced since the first half of 2018 and more in the pipeline. Before we conclude, we want to provide context on the current trade.
Pleased to share that our current trading in FY 2023 continues to build on the momentum seen in the second half of 2022 across our store network. With the first six weeks of FY 2023 delivering sales growth of 74.8% on the prior year and 21.8% on pre-pandemic levels. To put this into even greater context, this six-week period now means this has been the highest start to a year since 2006. While we believe there is significant uncertainty in the economic outlook, current performance gives us confidence leading into the all-important Christmas trading period, particularly given the strength of our multi-channel offer and in particular stores continuing to perform well. We are well placed to meet market volatility.
We are and have been focused on profitable sales growth, a disciplined management of in-inventory and cost, and a prudent approach to investing in our future capability. In conclusion, on page 27, as we said earlier, we'll continue to deliver against our Customer First Plan. It was the right plan when we started and the right plan going forward, and it's underpinned our growth in recent times. We've delivered strong sales growth, up 12.5%, with both stores and online performing well. Our online channel continues to outperform, delivering strong growth and scale and providing future value creation opportunities. We have delivered profit growth of 104%, second half up 219%.
We strengthened our balance sheet with considerable cash and a more flexible financing facility, and we continue to aggressively reduce space with more than 11% reduced from our store network since the start of the plan. This result and confidence in our plan has given us the ability to reinstate the dividends. While we've delivered the best start to a year on record, we believe we're well placed to capitalize on the year ahead, despite an uncertain economic outlook. We have the right value-based proposition of affordable and aspirational brands. We have a strong multi-channel offer, and we provide deeper customer value through our loyalty program and partnerships that will underpin the value for our business and for our customers.
Firstly, I want to thank all our shareholders, our team members, our brand partners and suppliers, but above all, our customers for their ongoing loyalty to this great business. Thank you very much for listening. We'll now open up the call for questions. Thank you.
Thank you. Your first question comes from Mark Wade with CLSA. Please go ahead.
Gentlemen, really solid result. Well done. A turnaround of the company been a really long time in the making, and these latest results show you've made some really good progress. What do you think, John, has been the real key difference in this current turnaround under your reign compared with some of these other attempts over the decades?
Well, I think it's simple that we've had a simple plan which affected all the key areas and the key drivers of the business. I'll just go back to the Customer First Plan. You know, it's about creating a better customer experience, whether that's in-store or online, in terms of the product, the offer, the conditions, the space, the service. It was about seriously going after online. If you remember four years ago, it was only in the AUD 100 odd million. Being serious about that. Right sizing the cost base of the business, whether that was the store support office or other parts of the business, focusing on bringing in great brands and making sure that customer experience was good.
An obsession on the balance sheet to give us absolute foundation for us to actually launch all of these initiatives. I mean, that was one of the things that we've aggressively targeted, and I think it's shown now if you look at our inventory. If I think back to our inventory four years ago, I think most of it was clearance. I mean, now we're looking at 5.8%, and we've got nearly 80% of our inventory under six months old, so it's all new merchandise. I think it's a number of those, but more importantly, it's about having good people to execute. You know, we've got a good team spirit here.
Everyone's focused, everybody understands what the Customer First Plan is, and everyone understands, you know, that one page that we show, beneath that there are work streams and details that are right down to everyone's KPIs. Although we show that simplistic slide as the Customer First Plan, actually it's beneath that is in the work streams are significant. One of the most important things was the loyalty program. It was a diamond in the rough, and the team has really focused on that. As you're seeing with the CommBank and the Virgin announcement, we're now able to commercialize that and have it as a revenue stream.
Great. No, very comprehensive. Thank you. Just looking at the second half and the year to date, FY 2023, that performance, I mean, how indicative is it of what you feel like the business can continue and maybe try and answer that through the lens of customer counts, whether that's foot traffic, transactions or what have you, and how that's compared to some of the pre-COVID times. How indicative is that?
I think it's difficult to compare it to last year because we were shut in 65% of the stores. I think there is a real opportunity. There's an opportunity for customers wanting to get back and get shopping. I mean, in terms of online, you know, we've seen significant improvement there and growth there. Whether it's online or in stores, that's great. I mean, we're happy with the momentum that we've got now, but we're mindful of what might be coming down the track, you know, next year. I think there will be some challenges for the customer. We know that we don't have a crystal ball. If we did, we'd probably sell it to the RBA and the Fed.
I think that, you know, I think for us, what we've got to do is just keep focused on what we can do and what we can impact in our business. We believe we have a great value proposition which allows people to trade up or trade down, depending on their disposable income. You know, as we said, one of our underlying tenets in this business is a disciplined focus on costs and cash, and we will continue to do that. I think the pandemic taught us a number of things, and we've come out with more agile, and I think we're able to react to changes in the market much more quickly and changes in consumer behavior much more quickly. I think we're well-placed to capitalize on the opportunities as they go forward.
Thank you. Last one. I mean, hypothetically, where's the merit, if at all, in a potential merger with your probably biggest rival in Australia here? Alternatively, I mean, where would that investment case struggle to stack up?
I'm not gonna comment on that, Mark. I'm just gonna comment on Myer today. Myer results, I mean, we're focused on, you know, we're focused on our business and, you know. We could go round the houses on the hypotheses around, you know, what could happen between DJs and Myer, but quite frankly, we're just interested in Myer today.
All right. Thanks so much for the reply.
No problem. Thank you.
Your next question comes from Michael Simotas with Jefferies. Please go ahead.
Good morning, guys. I've just got one question on gross margin, if I can. You've called out a few moving parts in the gross margin, and it looks like the percentage margin was about the same across the first half and second half. Can you just talk about the medium or how you see the medium-term outlook for gross margins? If you sort of look back over the longer term, since its listed history, Myer's gross margin's been, you know, maybe 150 basis points higher on average. Do you think you can get the OGP margin back to those sorts of levels?
Yeah, it's Nigel here, Michael. We certainly do. We feel that, you know, margin's probably gonna range between, you know, that 38.5%-41% over time, and it sort of really just depends, you know, on the seasonality and the, you know, consumer sort of confidence at the time that, you know, may impact sort of what we do in terms of discounting and promotional activity to clear inventory through. We certainly feel that we can move it up from where it has been this year, because we did make, you know, decisions this year around promotional activity that has dampened the margin somewhat. We also pointed out that, you know, things like shrinkage have increased. We've also incurred slightly higher freight costs during the year.
You know, one of our key focus areas will be to make sure that we maintain the cleanliness of our inventory, and that helps us in, you know, multiple ways, which is, you know, including what we've just done in this half year, which is to make sure that we've got ourselves ready for the intake that is coming in the next six months for the next season, and aren't cluttering up our stores with old edge clearance inventory in any way, shape, or form. You know, we'll continue to focus on that cleanliness as a sort of a key aspect of our trading.
Thank you.
Your next question comes from Simon Conn with IML. Please go ahead.
Yeah, John and Nigel, can you hear me?
Yep.
Yep.
Yeah. Great result, guys. Well done. Look, I just have, like, one question on the slide 23, just the split of categories. Obviously through COVID, we saw a lot of at home expenditure, so you've seen health and beauty being strong. Can you just talk about the category mix and what you're seeing there? And are you seeing movements between categories and is that the driver of variation in gross margin or all categories have a similar GM?
Yeah. There are differences, excuse me, Simon, in gross margins. But the thing is we're not reliant on any one. I mean, within womenswear, you've got accessories and lingerie, which perform strongly. Menswear's been particularly strong. The composition of each of those segments is different in terms of concession versus private label, so that obviously will affect the margin. So if the customer decides, you know, to trade, you know, into a concession rather than a private label, there's differences around there. But by and large, we've been pleased with the overall performance of each category. Within that, what it's done is allowed us to have a better balance throughout the year. We're not reliant, you know, we're not a fashion, women's fashion retailer, which is solely reliant on women's fashion.
If women's fashion goes off, then that has a significant effect on that business. Whereas for us, because we've got a strong men's, a strong basics, a strong home, a strong kids, you know, we're able to be agile and flex and follow the customer.
Okay. Great. Just, can I ask about the national distribution center, too? The, when that opens-
Yes
Do you have CapEx and return on CapEx guidance, return on capital sort of guidance as to what you believe you can drive in terms of efficiencies out of the business when that comes in place?
Yeah, the total CapEx spend in terms of kitting it out is in sort of the mid-20 millions, so about AUD 25 million. Our business case had a return on investment of north of 30% against our internal hurdles of about 15%. In terms of what it'll do to pick and pack costs, we'd expect it to drive our pick and pack cost down by about 20%-25% over a two to three year period. The other aspect, Simon, of that is our aspiration to continue to grow online, and with our current sort of framework in terms of fulfillment, we actually would cap out at sort of, you know, growth volumes, not too sort of different to where we are today.
If we're gonna continue to grow our online business, this is absolutely necessary for us to be able to sort of cope with that aspirational AUD 1 billion per year.
Right.
Our business case didn't include benefits that we might achieve out of sort of store replenishment as well.
Right. Is your experience that the online sales growth is cannibalizing the in-store experience, or is it additive to that?
There's no doubt that there is some level of cannibalization, but we think it's sort of relatively low.
Thanks, Nigel.
Your next question comes from Johannes Faul with Morningstar. Please go ahead.
Hi. Good morning, John and Nigel. I had a question on inflation. You called out cost inflation. How is inflation affecting the top line and especially, let's say, the last six months? What's the ASP doing for you?
Well, as John said, sort of, we've seen sort of our strongest start to a financial year that we can sort of find. At this stage, we're not seeing any impact from, you know, inflationary pressure on the consumer. As John sort of highlighted, we are very cognizant of that, potentially coming down the pipeline at us either towards the back end of this calendar year or more likely earlier next calendar year.
Yeah. Have you lifted prices? Have you seen a lot of inflation on your shelves?
Well, we haven't, but the vast majority of our sales, remember, are with national brands and so we sell at their RRP. Where we can influence price, this is in our private label and we haven't changed our private label pricing at this point. We always look at the pricing of that product relative to the national brands that we're selling and adjust them commensurately.
Okay, great. Just on the inventory piece, on the inventory transit, did you order more or did you order it earlier?
Both. Volumes are up, no doubt, in terms of our intake, but we also accelerated our ordering by approximately four to six weeks to make sure that inventory is actually in situ for the sort of start of spring and then obviously the start of the important Q2 period.
Yeah. We wanted to mitigate any delays in supply chain, so to make sure we have the merchandise there and obviously, Johannes, year on year, we were closed for most, you know, for months last year, so we needed to make sure we could restock the stores. As I said earlier in the presentation, the great thing is that the lead time to that stock is six months or under, so it's all new.
Great. Thanks a lot.
Thank you.
Your next question comes from Shaun Cousins with UBS. Please go ahead.
Good morning, John and Nigel. Maybe just a few questions.
Good morning.
G'day. Just on online, can you just talk a little bit about with the NDC, obviously that there's some clear benefits there in the way you fulfill. How do you see online then from a margin perspective in comparison to stores on a post-NDC basis? Does it make it in line with stores, better than stores? Conscious there might be a different mix as well of what you sell. Just what does it do to the online margins that you generate then, please?
Yeah. It's a good question, Shaun, which we get asked regularly. We don't allocate every single line item in our P&L, because it's just not feasible to do that. We look at a contribution level. Pre-pandemic, the stores, the bricks-and-mortar stores had a better contribution level than online. As we went into the pandemic, and we saw significant online growth and a higher percentage of total sales in online, that dynamic went the other way around, and online outstripped bricks-and-mortar for the last two years by three or four percentage points. In the last 12 months, that's started to just correct a little bit. I think it's a wait-and-see, but obviously the NDC would assist the online cost equation, and therefore we'd expect that to you know, broadly sort of improve the dynamic there in favor of the online business.
Fantastic. When you're thinking about online, and I'm not sure if you've broken this down, but how do you think about the mix of your sales and maybe where your sales growth is coming across first-party and third-party sort of product?
Well, to be honest with you, we just like sales whichever party they come from, to be honest with you. I think it's really the opportunity. For example, I'll give you a classic. You know, I wanted to buy a stone cast iron casserole dish the other day. I'm not carrying that on the tram back from Bourke Street, but I went into the store to actually check it out, speak to the team, and then I ordered it online. I think big and bulky definitely lends itself to online. But also what's really important, as we make the big brands bigger, what we're able to do is the endless aisle for online. In terms of, you know, if you take
I'm using home as an example here, but if you take the De'Longhi Cities of the World toaster, it comes in about 20 colors. We'll have the top four in stores or top six, and then we'll have the other 14 or 16 online for customers to choose. I think what online does is it allows us the flexibility to show range, width of range. But in terms of, you know, the brands, what we tend to do is work with them on what works best in store, what works best online, and maximize it that way.
Understood. Apologies if this was mentioned in the presentation, but just around Frankston and more generally the work you've done on your store network, where do you feel you're at in the broader journey of getting your store network in the right sort of shape in that it seems to be a very patient approach you've taken rather than aggressive write-downs and closures rapidly. Just curious where you think you are in terms of optimizing your sales space.
Yeah.
which has implications for the number of stores you have.
Yeah. I think you're right. We haven't been aggressive deliberately because we don't want to waste shareholders' cash. What we want to do is go in a measured approach with the landlords where leases are coming up, but we have the grown-up discussion about what they're planning on doing with their centers. Well, we have had strategic discussions with the big landlords about, you know, what they're trying to do with their assets in the future and what is the right size Myer for the asset or actually should Myer be in that center. What we've done is we've come out of the centers that we don't believe work for us, either economically or for the long-term strategy or the demographic.
More importantly, you know, the landlords have realized that, you know, a strong, right-sized Myer is actually a draw card for footfall, particularly because of what we've done with our branded offer and obviously our online offer, which drives customers into store. We've got a ways to go, you know. Basically as I said to you before, Shaun, you know, it's more about floors, not stores. As in we don't need four floors anymore. You know, it might be we might need one floor or two floors or three, depending on the market size. We talked in the presentation about the 17 more stores that we're looking at every leverage. We've got a number of stores in the pipeline, and we'll update on those, probably at the AGM.
Fantastic. Thanks so much, John and Nigel.
Thank you.
There are no further questions at this time. I'll now hand back to Mr. King for any closing remarks.
Thank you. Thank you all for joining us today. Apologies for the late start, but we're here if you have any further questions and look forward to speaking to you all soon again. Thank you. Have a good day. Bye.
That does conclude our conference for today. Thank you for participating. You may now disconnect.