I'll now hand the call over to Myer Group's General Manager, Investor Relations, David Akers. Please go ahead.
Good morning, everyone. For today's briefing, we have Myer Executive Chair, Olivia Wirth, and Group Chief Financial Officer, Kathy Karabatsas, on the call. Olivia will provide a brief overview of the first half of FY 2026, and Kathy will step us through the group financial results and segment results. Olivia will then share some highlights on the execution against our growth strategy and an update on trading for the first seven weeks of the second half. There'll be time for questions at the end. I'll now hand over to Olivia.
Thanks, David, and good morning, everyone. Starting on slide two. While we are pleased with the results we have reported today, I'm even more pleased to note the progress over the past six months in the execution of our Myer Group growth strategy as part of the plan to strengthen the business. As you know, we're in the first year of a three to five-year transformation program to set up the Myer Group to meet the evolving needs of customers. At our Investor Day last year, we shared the detail of the plan underpinning the work we are undertaking to transform Myer. We know the strategy is the right plan for Myer, and the increasingly uncertain macroeconomic environment underscores the importance of sticking to the plan and focusing on execution.
In the past six months, we have built momentum across the organization and we are looking to accelerate implementation of the growth strategy. With our financial performance for the first half of FY 2026, we delivered growth in total sales and operating gross profit was in line with the prior year. While these growth percentages are modest, they are positive and reflect well on the integration and business transformation activities that are now being embedded across the group. We ended the period with a net cash position of AUD 287 million, reinforcing the strength of our balance sheet. One of the highlights of the half was achieving another record for the Myer One tag rate, and we continued to grow active customer numbers in this world-class loyalty program. We are very well-positioned financially and offering an increasingly compelling proposition to our customers.
Importantly, as you'll see today, we are continuing to attract new and exclusive brands in fashion and beauty. These brands are choosing to partner with us and actively moving across to Myer. They are buying into our strategy and can see tangible evidence of our execution. We're making good progress with the integration of Apparel Brands. It's on track, our people are engaged, and synergies are being realized. While we remain in the early phase of the transformation of the Myer Group, the speed and success of our execution in the first half demonstrates we are well-placed in positioning the business for growth. Slide three summarizes the key metrics of our first half financial performance. We achieved growth in total sales, and operating gross profit was in line with the prior year.
Given the macroeconomic backdrop and our current phase of investment, cost of doing business was a priority for the team in the half. You will remember that we launched a value creation program in the second half of 2025 to confront CODB pressures, with the new initiatives introduced to reduce complexity and cost, as well as increase productivity across the business. While CODB pressures remain, we delivered CODB to sales of 27.9% in the half, which was well within our FY 2026 target of 29%. The strategic investments we made in the first half are also the primary reason for a lower pro forma earnings and NPAT, despite the significant increases from the inclusion of Myer Apparel Brands on an actual basis.
Our top-line growth, well-managed underlying cost of doing business, and a strong balance sheet together have given us the financial strength and the confidence to continue investing in the business to drive our growth initiatives. Today, we're also announcing a fully franked ordinary dividend of AUD 0.015 per share, representing a payout ratio of 50.1%. The board's determination on the dividend reflects our strategy to continue to invest in the business while maintaining a strong balance sheet and appropriately rewarding shareholders. It also underlines our confidence in the strategy and the progress we've made in delivering against it. Slide four further illustrates our growth in total sales and flat operating gross profit for the half. For transparency, we've shown actual and pro forma growth side by side in these charts.
The result reflects positivity and resilience in our overall business as we continue to progress transformation and integration activities despite macroeconomic headwinds. Myer's Group scale and diversity generated through the Apparel Brands transaction is crucial. Scale provides a number of competitive advantages, including greater purchasing power, deeper data insights to better understand our customers, greater operational efficiencies, and the opportunity to invest in and broaden capabilities. In the contemporary market environment, building resilience is more important than ever. With that, I'll hand over to Kathy to take you through the group's financial performance in more detail. Thanks, Kathy.
Thank you, Olivia. Good morning, everyone. Turning to slide six. As Olivia noted in her opening remarks, comparisons to the prior period should also be considered on a pro forma basis, given Myer Apparel Brands was included in the results for this half, but not in the first half of financial year 2025. To help you better understand this, we have included analysis and references on a pro forma basis as well. The increase in total sales on a pro forma basis was largely spurred by growth in Myer Retail. As we highlighted at our annual general meeting in December, Myer Retail posted a record Black Friday trading performance. Pleasingly, sales in the all-important December and January period were in line with the prior corresponding period. We achieved growth in womenswear, home and concessions for Myer Retail and in Just Jeans for Myer Apparel Brands.
We also delivered online channel growth of 18% or 4.4% on a pro forma basis. Operating gross profit on a pro forma basis was flat, impacted by growth in lower margin categories and targeted promotional activity to clear older Myer Exclusive Brand stock ahead of the arrival of the new and relaunched five Myer Exclusive Brands. Cost of doing business was higher, reflecting the inclusion of Myer Apparel Brands and investment to drive our strategic growth initiatives. CODB as a percentage of sales was only 84 basis points higher on a pro forma basis and within our FY 2026 target plan. EBITDA, EBIT, NPAT and statutory NPAT were all higher due to the inclusion of Myer Apparel Brands, partially offset by our investments to progress our strategic growth priorities. NPAT also benefited from our refinancing alongside the apparel brands acquisition.
On a pro forma basis, these metrics were lower, reflecting our investments to drive the Myer Group growth strategy. Turning to slide seven. This slide shows the Myer Retail segment performance. Sales were driven by growth in home, womenswear, menswear, kids, Myer exclusive brands and concessions, and were offset by lower sales in our national brands and beauty. We are encouraged by the top-line results for Myer Retail. Looking at total sales for each of the first halves from 1H 2023 to 1H 2026, it highlights a top-line trajectory improvement, which is pleasing. Looking at comparable sales, this was also up 2.2%. Sales from our online channels were up 5.8%, assisted by growth in sales from Marketplace up 9.3%. While our operating gross profit growth in dollar terms was positive, our margin was slightly lower.
This reflected mix shift and targeted promotional activity to clear legacy Myer exclusive brands ahead of relaunch. Overall, the segment result and contribution margin were slightly lower, both reflecting our investment in the growth strategy. Moving to slide eight. Sales in Myer Apparel Brands were up 0.6%. This was led by growth in Just Jeans, partially offset by the other brands in this segment. Just Jeans now accounts for approximately 38% of sales in the apparel brands portfolio, underlining denim's evergreen appeal with customers. That's why we've focused on making a number of changes to Just Jeans since the apparel brands acquisition. This includes enhancements to buying processes, simplifying and streamlining product and range, investing in additional stores, and revamping store formats. These initiatives are working and it's resulting in strong growth for Just Jeans.
We are applying a similar approach in implementing changes to the other Myer Apparel Brands. Already, more than half of our customers who are also shopping apparel brands are doing so with Myer One. This tag rate is a great result given it was only rolled out in August 2025. The data and insights we are gaining from Myer One are helping us better understand the customer of each brand. This will then inform what product each brand should stock and how they go to market. For example, we know many of the younger Jay Jays customers don't read emails, so we pivoted our marketing with greater emphasis on digital media. Turning to slide nine. On slide nine, I want to highlight a few items in the cost of doing business bridge.
On this slide, we have provided a pro forma view of 1H 2025 to 1H 2026. The bridge shows the underlying increases in cost of doing business. The numbers shown here are on a net basis. Given the inflationary pressures on costs that came through in the second half of FY 2025, which continued through into the first half of FY 2026, we had to closely manage CODB. Some of these CODB increases would have been higher, however, they were offset by closely managing our cost of doing business through value creation initiatives such as the closure of our Myer Asia sourcing office, consolidation of our hubs model, and from the reorganization of staffing flexibility in our Myer retail stores. Cost of doing business increases were also offset by benefits from our integration and changes with Sass & Bide, Marcs and David Lawrence.
Here, we hibernated the Sass & Bide brand and closed the Sass & Bide stores, integrated the back office and exited David Jones stores for Marcs and David Lawrence. The bridge then shows the AUD 14 million investment we have made against the strategic growth initiatives. While a number of the initiatives in which we are investing have a CODB and/or OpEx component, we recognize they are fundamental to the Myer Group growth strategy and underpin efforts to build an increasingly diverse retail offering. That AUD 14 million is across a number of initiatives, which include Project OpEx and increased capability investment in e-commerce, loyalty, product and merchandise, and sourcing. Some of this investment is one-off and some will be of an ongoing nature. Overall, CODB increased by 5.3% on a pro forma basis.
Excluding the increase from strategic initiatives, this increase was 2.9%, which was well below inflation. In light of the broad inflationary headwinds and a clear focus on cost management across the business in the first half of 2026, we delivered a good outcome in the half. We are retaining this commitment and remain focused in managing our cost base in the second half of 2026. We have also picked up great insights into additional value creation opportunities for the second half and beyond. This includes the actualization of the benefits from the closure of the Myer Sourcing Asia office and hubs consolidation, the retail operations restructuring in Myer Apparel Brands, and further consolidation of supplier terms. Turning to slide 10. Operating cash flow for the period was AUD 57 million higher, primarily due to the increase in EBITDA, ultimately reflecting the inclusion of Myer Apparel Brands.
CapEx was slightly lower versus the prior corresponding period due to timing of investment in our store renewal program and in the national distribution center. During the period, our investment in the NDC was minimal and as you would expect, will remain in line with key deliverables. Free cash flow and net cash flow were also pleasingly higher. Turning to slide 11. Slide 11 summarizes our balance sheet. This is in good shape given the refinancing we completed in 2025 and our financial performance in the first half of 2026. We closed the half with a healthy net cash position of AUD 287 million. Inventory was up in line with the plan to support the launch of our new Myer exclusive brands, less the exit of the old brands, investment in new national brands and key existing national brands across womenswear, menswear, beauty and home.
With that, I'll hand back to Olivia.
Thanks, Kathy. Before I provide a quick update on how we're executing against our strategy and our trading performance for the first seven weeks of the half, I wanted to remind you where the team has been focused. While we're moving at pace and changes underway across the business, we've made it clear internally and externally that we have four priority areas. First, fixing the basics to reset the business. This includes resolving operational challenges, working through the issues at the NDC, and ensuring our foundation is solid. Second, we are positioning the business for growth by integrating apparel brands, modernizing our sourcing capabilities, and optimizing our store network. Third, we are strengthening competitive advantage through a revamped Myer One, a refreshed product mix, and building a data-driven retail platform. Fourth, we're simplifying the business, reducing complexity, eliminating duplication, and streamlining operations.
In practice, this means moving across to group services, centralizing sourcing, and modernizing our distribution. In less than a year, we have made significant progress on our strategy, and these priorities have been key. The progress so far confirms we're heading in the right direction and gives us the confidence to maintain the speed and urgency in our execution. Turning to slide 13. Building a retail platform is differentiated from the traditional department store model is central to our strategy. The Myer Group is more than a network of department stores. We operate around 700 specialty stores, boast a growing and profitable range of relaunched Myer Exclusive Brands and a mature online proposition, all underpinned by a world-leading loyalty program. We're targeting growth by capitalizing on the benefits from our loyalty program, our increasing assortment of leading and loved brands, and in enhanced and varied channels to market.
Alongside our in-store offering, we continue to grow our online channels, offering customers a superior omnichannel experience. In addition to the national brands within Myer Retail, we're investing in our Myer Exclusive Brands, and while it remains early days, there are positive signs in what we're doing. Our approach to MEBs will unlock higher margins. This is complemented by investments to expand our offering to customers. Furthermore, with the acquisition of Apparel Brands and the opportunity to apply our loyalty program and omnichannel retail thinking, we have a higher degree of diversity and strength in our overall positioning as a group and are more resilient as a result. We're also confident that our strengths are translating into more connected and engaged customers.
Looking at some of the highlights against our priorities in FY 2026 from slide 14. Against the customer and loyalty pillar of our strategy, we've done what we said we'd do. As well as the relaunch of the enhanced Myer One, we unveiled a shoppable app, expanded our loyalty partnerships, and made further inroads leveraging AI data modeling and content generation to drive personalization. As a result, our tag rates for Myer One are up again in Myer Retail to a record 80.9% and strong in apparel brands. We've also increased our active Myer One customers to a record 5.1 million. On slide 15, we're really excited about the progress we're making in products and brands for Myer Retail. We've now invested in and relaunched our Myer Exclusive Brands.
We've welcomed 22 new beauty brands and 14 additional brands across womenswear and menswear, with 20 more to come this half. We're also delighted to have secured global brands such as Fenty Beauty, La Mer, Guerlain, and Gap, which we announced yesterday, adding even further weight to our offering. New and exclusive brands are choosing to move to Myer, illustrating the growing momentum across the group. Brands are making this choice because they are buying into our strategy of building an omnichannel retail engine and can see tangible benefits in showcasing their products at Myer. This confidence extends to the brand's own investments in new and upgraded in-store shopping experiences within Myer department stores, with more than 1,400 new pads or shop-in-shop and fixture upgrades planned by brand partners in dedicated spaces on the floor in the next 12 months.
This is a significant investment these brands are making in Myer. Now to slide 16. The integration of Myer Apparel Brands is progressing. We successfully transitioned across to Myer One, added four Just Jeans stores of the future, and exited several transitional services, including retail operations, e-commerce, people and culture, and finance in line with the plan, giving us more levers to pull in that business. We continue to target at least AUD 30 million of annualized synergies related to Myer Apparel Brands integration. As you can see on slide 17, our plans to deliver an enhanced omnichannel network are also progressed. We've continued to optimize our store network. We've closed 22 and opened 12 Myer Apparel Brands stores. We have also undertaken some test-and-learn trials with Portmans and Jacqui E concessions in Myer Castle Hill. Both traded within the top five womenswear brands in that store.
For Myer Retail, we've announced investments, including a complete store renewal at Myer Morley in WA and a relaunch of the Myer Sydney Beauty Hall. We will also close Myer Roselands in July. Our ambition in online channels is significant, and we're excited to launch a new marketplace platform for Myer in May. This will allow us to offer more products across a wider range of brands and increase our appeal to customers. Finally, on our sourcing and supply chain, a few updates here. Our third-party logistics arrangements operated effectively through peak season. This resulted in approximately 32% of online orders fulfilled from our 3PL NDC and other distribution centers, up from 13% in the first half 2025. This also resulted in an online orders blended cost per unit saving of approximately 13%. Our contingency arrangements continue to work effectively.
At the NDC, we're continuing to progress the proof of concept stage. This work is crucial as we want to mitigate execution risk. Given the scale and complexity of the project and the challenges under previous management at this site, we are undertaking more extensive design and testing on our proof of concept to ensure the project's full potential can be realized. This will have a flow-on impact on the timings of the NDC. We remain on track for FY 2027, although full implementation will now likely follow the peak trading period. As Kathy noted, during the first half, there was minimal incremental CapEx or OpEx committed. Our investment will be triggered only by achievement of specific project deliverables at the site. We all recognize the importance of the project, and the priority is to get it right.
As part of our value creation program for sourcing, we closed our Myer Sourcing Asia Limited, or MSAL, in January. This is the first step towards simplifying our supply chain and building efficiencies over time, including direct-to-factory sourcing. It also helps to unlock the next stage of simplification with the closure of the hubs. Moving to slide 19 and our trading update. The second half of FY 2026 is off to a good start. We are confident in our plan, and we remain focused on what we can control. At this stage we remain cautiously optimistic about the second half. However, we're also cognizant of the things we can't control in relation to the shifting global geopolitical and macroeconomic uncertainties and the impact that may have on the economy and consumers here in Australia.
That's why the value creation program launched last year to help keep the lid on our cost of doing business is so important. We remain focused on managing CODB for FY 2026 at approximately 29% of sales. For the first seven weeks, Myer Group sale totals are up 1.7%, led by Myer Retail with 2.2% and Myer Apparel Brands slightly down at 0.4%. The comparable sales for Myer Group was 2%, Myer Retail 2.7%, and Myer Apparel Brands 0.9% lower. Our Myer Retail segment was impacted by some of the changes that Kathy mentioned earlier, such as pausing the Sass & Bide brand and the store closures and back-office integration. Pleasingly, with Myer Retail, we've had double-digit growth in home and kids, supported by further double-digit growth in Myer Marketplace.
In Myer Apparel Brands, the growth in Just Jeans has continued at 9.8% for the first seven weeks of the half. Finally, as we transform our unique and scaled retail platform, we are building better growth potential and a greater degree of resilience within the business. Alongside our ambition to build a retail powerhouse that is unmatched in Australia, we want to drive earnings growth and generate sustained returns for all shareholders across economic cycles. We enter the second half with an improved product offering and a stronger customer appeal, and we look forward to welcoming more and exciting brands to Myer. We've significantly strengthened all our channels to market. We've improved leadership capacity and team capability. We have enhanced Australia's most valuable retail loyalty program and increased customer relevance. We are demonstrating disciplined cost of doing business investment.
We have a net cash position, a healthy balance sheet, and the board has a sound capital allocation framework in place. The execution of our strategy is on track, and strong buy-in from our people, partners, brand, and stakeholders. We also, while we acknowledge that we have more to do, we are confident that we are entrenching resilience and positioning the group for sustainable future growth. I'll now hand over to David for the Q&A.
Thanks, Olivia. We now have time to take your questions. I'll ask that you please limit yourselves to two questions and then rejoin the queue. Harmony, can you please open the line for our first question?
Thank you. Your first question comes from David Errington from Bank of America. Please go ahead.
Morning, Olivia. Morning, Kathy. Yeah, look, really great presentation. I must admit, Olivia, when I listen to you, all the work that you're doing, I get exhausted just listening. You're so busy. I suppose where I'm going with my question is, you're doing everything that you set out to do. You really articulated your, at the Investor Day, your plans, and you're going full steam with a lot of energy. For that, I congratulate you on that, and hopefully, you keep that effort up. The question where I'm going with that is now from us, from the financial market, we wanna start working out when we start seeing your hard work and all your efforts start transpiring into some of the numbers.
When I look at your numbers, I look at your gross margin, and I look at your cost of doing business line, there's a lot in there that tells me that first half 2026 really did get hit by this transition that you're undertaking. There's a lot of one-offs there that I wanna start exploring and digging into because what I'm trying to work out is where are we in this transition journey in terms of the impact on the numbers? Where I'm going with the gross margin, your gross margin's down, I think about 70 basis points on a pro forma basis. How much was in that first half that you could say, "Okay, it's now passed," like the clearance of the MEBs and all that sort of stuff.
How much are we now that we can now start to say, "Okay, we've rebased the gross margin. Now we can start looking to grow the gross margin with your reintroduction of the MEBs." In other words, how much are we past in terms of that transition of getting out of MEBs that you didn't wanna be into when you went from 13 to five, I think it was. In the cost of doing business line, I know this is a big question, but this is what's important to me, is that this transition cost, this strategic growth and investment of AUD 14.5 million, that is a big hit that you're wearing. Where are we with that? How much more do we have to go through to set you up?
I've got no doubt that when we get through this journey, you're gonna set Myer up for a lot better position than what it was before. I just wanna know how much more of an impact on our earnings do we have to keep taking before you're through it, and then we can start looking for growth. Now, there's a bit in that, and hopefully, you understand where I'm going, but I'm really supportive of what you're doing. I just wanna start seeing where we're at in terms of numbers so that when we're forecasting your growth, we can identify, you know, how far are we into the journey, how far we've got to keep going, and then when are we past it?
Thanks, David. Appreciate your question. Yes, there is a lot in that, so let's start unpacking it. To begin with, we're obviously in year one of a three to five-year plan, but we are now very firmly in execution stage, and I think we've been clear about where we wanna go, and it's on us and the management team to provide regular updates and demonstrate that we are making headway. There are a number of one-offs that we had in the first half. You've already mentioned the exit of MEBs. That was a strategic decision that we've taken. The relaunch of the private label business and MEBs is very important for us in apparel. We did exit 13 brands.
We made the decision to exit those brands in the half to make sure that we can set ourselves up in a much cleaner position in the second half. That is a strategic decision we made, and we believe it's the right one for the business. The MEBs businesses are very important. We're very focused on improving our margin, and obviously refocusing on the private label business just like we have in home, in our apparel business, is strategically important for us and will deliver returns for the business and for shareholders. We also had brands exiting the business and brands entering the business in the first half. Again, that will set us up well in the second half. We do have an ambition to have a much stronger offering in terms of womenswear and in terms of beauty.
That does take time, but we're well on our journey. We are in year one. We're well on our journey, and we did set out an ambition to obviously start hitting this three- to five-year journey. Just from a MEBs perspective in the first half, just to give you a quantum of the clearance, we've cleared to about three-quarters of our MEBs. So that's a significant proportion. Gives you an idea of the quantum of the clearance.
Mm.
Yes, you know, we would have taken a hit, but it's important you understand this, David. It's important for us to start the second half in a clean way and that we can make sure that these brands show up. Not too sure if you've been into store recently, David, but you know, if you are in Melbourne, Sydney or one of the stores, you'll see these brands. They're a standalone business, standalone brands in store, and they're very important for us from a customer perspective. There are a number of one-off investments that was made. You've called that out. We've tried to provide greater clarity about our investments. Some of these investments are ongoing, some of them are one-off. If you think about the investments, this is an investment in the future.
We re-platformed the Myer One business. There's a new loyalty management system in place, which means that we can use the data at scale to provide greater personalization. It means that we can acquire the customers in a more effective way. We're seeing the strongest growth of Myer One acquisition customers in the half. We've also seen the stronger engagement. We've tipped over five million engaged customers. That engaged customer grew by 7%. That is a significant growth in engagement. Why is that important? That's important because we wanna gain more share of the customer wallet moving forward. We wanna bring the customer back in. We wanna encourage cross-shop. That investment's important. That AUD 40 million investment also includes the investment of our marketplace. You'll have seen in the half over 9% growth in the marketplace.
We have ambitious growth in Marketplace. That will relaunch in May. We needed to re-platform so that we can bring on more supply in a more efficient way. We believe, as you should, there is significant growth that we can get from Marketplace once we relaunch with greater SKUs, greater opportunities for our business. Look, yes, these investments are important. Some of them are ongoing, some of them are one-off. We believe that this will deliver for us not only in the second half but also into FY 2027.
Just, I've got another question, but just to follow up that some are ongoing, but you're getting hit now, aren't you? I mean, you're going through the whole share. They should mitigate a little bit going on. Like the gross margin, that impact from the clearance of MEBs, I'm imagining, is quite significant. That should start to mitigate a bit in the second half, I hope. Some of it should mitigate. First half 2026, where I'm going, is probably the absolute eye of a storm. Is that correct in my observation?
Yeah. David, it's Kathy. Hi. Yes, you're correct. We did bring forward, as Olivia said, a more intense promotional activity in the first half to clear the retiring brands. You know, going into the second half, we obviously with three-quarters of that inventory now cleared, we won't be having that promotional intensity. It doesn't necessarily mean that given the market, the macroeconomic activities that our promotional intensity may well be there, but not as it relates to the depths that we've had to go to on the Myer Exclusive Brands.
Yeah.
Which have obviously impacted-
Yeah.
Our GP rate and our GP dollars.
Yeah. Yeah, yeah.
Just on the one-off investment, if I can just sort of add my piece to it. We obviously have a strategy. That strategy is about transforming the business, a business that hadn't been invested in for a significantly long time under previous ownership. We are all about bringing the Myer Group into, you know, growth into the future, and we will need to invest in year one and probably part of year two. Ongoing after that, we should be able to see the benefit of our investments that we're making upfront today. To the point that Olivia made, some of the investment is ongoing. A lot of it relates to where we are, you know, implementing SaaS-type technology that unfortunately you can't capitalize and it hits the P&L, and that's what a lot of this Project OpEx relates to.
A lot of this investment, David, is it's really foundational. You know, if you think about the growth that we've seen in Myer One, I mean, you think about the growth opportunities that we have across the Myer Group, investing in the customer, ensuring they're engaged and driving cross-shop, we firmly believe, is a foundational investment that sets this business up for future years. It really ensures that we can lean into the growth that we're seeing in Marketplace. It drives the growth we've got online. It brings in the new customer. Investment in these sorts of foundational aspects of our business will absolutely deliver returns in future years. You can also see, if you think about the ambitions that we have around having the right product mix in store.
We've seen a number of new brands come on board. We've got the support from our brand partners. Equally, those brands will trade in a better way if you have the right engaged customer and that are driving that cross-shop. This is foundational investment. We're very much committed to making sure that this momentum continues. We do have a plan. We're being methodical. We will continue to deliver on our commitments that we make. This is a plan that we're now in year one, but we have momentum. We're very much focused on execution, and we're genuinely excited about the opportunities not only from a customer perspective, but in time, a shareholder return perspective as well.
Well, thank you, Olivia. Thank you, Kathy. I mean, I had my fair share today, but yeah, that Myer One card, that tag rate and that 400,000 of customer acquisition, that is really impressive. Thank you for your answers. Yeah, I look forward to continuing to see the growth and the recovery. Thank you.
Thanks, David.
Thank you.
Thank you. Your next question comes from Julia de Sterke from Morgan Stanley. Please go ahead.
Hi. Morning, Olivia and Kathy. Maybe first, just on how you're thinking about the product mix in Myer stores. You know, you mentioned just then, you know, some new brand partnerships across various categories, obviously the exciting relaunch of the MEBs. Could you just speak to how you're thinking about the opportunity for improving space productivity in your stores, with this remixing program?
Yeah, look, space productivity is obviously a key focus for us, but if you take it back to what our focus has been, is that really starting with the customer, understanding the data, and having a very clear view not only on the purchase data, but what are those brands that are wanted by our customer, and how do we ensure that we reset a number of our key segments that we participate in? If you think about apparel and fashion in women, the data showed us the insights demonstrated that there is an opportunity for us to have a better assortment and offer to a broader range of customers. We've been very clear about our ambition to reset fashion for women, and we're well on that journey.
That means exiting some brands, bringing in new brands, and also resetting our Myer Exclusive Brands, which launched in February. There's already 14 new womenswear and menswear brands that have come into Myer. We've exited a number as well, and there's 20 more brands to come in the second half. That is also about improving productivity on the floor, how we take these brands to market. I think what you'll have noticed, anyone that's walked into a Myer store recently, in the January period, there was a relaying of the apparel fashion floors, over 2,000 changes across our network to make sure that we are setting ourselves up for this growth, that we can improve productivity on the floor. This is the same for beauty.
We believe there's a significant opportunity for Myer to grow our beauty business. We've been strong in fragrance for some time. We have new ambitions to reclaim skincare and color to ensure that we can attract the right customer through various life stages. We've announced some acquisitions of new brands recently. Fenty is an example. We'll roll out to all 56 stores in May. That's a significant contribution to the Myer offering in color. Equally, MAC Cosmetics, owned by Estée Lauder Group, will become exclusive to Myer department stores from the middle of this year as well. We're also targeting skin. We've got new brands coming in from a luxe perspective, and that's around having a greater assortment of beauty products online and in-store. From a Sydney Beauty perspective, this is where you'll see productivity improve.
There is an additional 120 brands that will be joining Myer on our ground floor alone in Sydney Beauty. That's a significant improvement in not only offerings from a customer perspective, but it improves our productivity as well. Beauty is a high-margin business. It's a focus for us. It's a great driver for men and women into our stores. What you'll see over the next 12-month period is improving brands for our customers, making sure that we understand what our customers want, and bringing those wanted brands and products in store, rolling out existing brand partners as well.
There are some brand partners who may be in 20 brands, 20 of our stores are rolling out to all 56, so there are very distinct plans by Myer department store and online of growing out these verticals and making sure that we can continue to bring in the customer. We haven't spoken about home, though. Home continues to produce double-digit growth for us. We've got strong private label businesses there in Vue, Heritage, House & Garden, all very strong brands, and we're also leaning into that because we see significant opportunity. Just because we've spent quite a bit of time talking about the strategic reset in fashion and beauty doesn't mean that we're not also leaning into other growth areas like childrenswear and home.
Excellent. Thank you. Just secondly, just on the Apparel Brands ex Just Jeans. So now that you've got kind of decent loyalty penetration there now, what more can you do from here to re-accelerate top line there? And maybe just speaking to, you know, further store consolidation and any early reads that you've gotten on the trials of, I think it's Portmans and Jacqui E in one of your Myer stores, for those brands.
Yeah. Obviously, it's early days. We're very much at the start of our journey with apparel brands. What we started to do from the very beginning, we obviously rolled out Myer One. That gives great insight into the purchase data of those customers that are now choosing to shop across all apparel brands. We also did a piece of work, a significant deep dive into the customer profile. Who is the customer today across all the five apparel brands, who the customer should be for tomorrow, and what changes we think we can make to the brands over time to obviously improve top line growth and encourage the supply of customers to each of these brands. The learnings. There are many learnings.
The pathway forward for each of the brands is distinct and different. Obviously, we have started with Just Jeans. We see there's significant opportunity there. We've optimized the range. We've looked at different reduction of buying. We've invested in four stores of the future, which is a different format to test and learn the service provided by our team leaders and the type of returns we can make on that level of return, and there's some very encouraging signs. Some of the brands, there is a brand reset of brand DNA needed for some of the brands as we look to attract a young customer. These changes will be made in time.
We're very focused brand by brand, understanding the customer, understanding what the needs of those customers are, to ensure that we can deliver growth into the future. I should also say that obviously you've seen some good results here with Just Jeans. The team have done a great job. Denim is definitely trading well in this market. We believe there is more opportunity. It doesn't mean there isn't other opportunities across other brands, but denim there is a particular strength, it's very much the DNA of the Just Jeans team, and we believe there is further opportunity to come. You mentioned there the trial that we've done, and we should say we are testing and learning across the board.
We're going to test and learn because it gives us data and insights into how the customer responds. You mentioned Castle Hill. We've tried Jacqui E and Portmans there. There's some learnings there. It's a smaller assortment. It's not the full assortment. This gives us some understanding around what the Myer customer sees in those brands and will also provide the insights to be able to roll those brands out to other stores where there is the right customer. It won't be across the board. We're being very targeted to understand how these products, how these brands relate to a particular type of customer and where those customers that have been shopping in Castle Hill, we're currently looking at where else is that customer segmentation across the Myer fleet, which will obviously deliver benefits. Watch this space. More to come.
We're very focused on each of these five brands and the future that they have within the Myer Group.
Great. Thank you.
Thank you. Your next question comes from Garth Francis from MST Marquee. Please go ahead.
Good morning, Olivia and Kathy. Thanks for taking the questions. Just one on the concession margin. I know that doesn't get broken up in the first half as much as it does with the full- year. Just with the newer brands that you're bringing in on a concession basis, just how impactful is that and what change might we expect for that concession margin going forward?
Yeah. Let me just talk at a top line here, Garth. There's a number of factors. Yes, we're bringing in new brands. That's one thing. We're also, in some instances, moving wholesale into concession, and that makes sense for us for some of these brands, particularly some brands that are high shrink, for example, Garth. The overall mix is definitely changing. But we shouldn't forget the importance of concession brands. We want brands. We want brands that are just exclusive to Myer because it drives visitation. That's very important for us, and concession will be an ongoing important role for us in fashion and apparel, as will wholesale, as will our Myer-exclusive brands. But the concession brands do play a very important role to attract the customer.
Yeah, and-
Appreciate that. Is that concession margin holding flat?
Yeah.
Is it because you're taking on these new brands, or should we expect a little bit of compression there?
I think what I would say, Garth, is it's flat. Concession margin would be flat, but we have had, as Olivia said, growth in concessions in the half.
Yeah.
I think the way you've got to think about it on a concession basis is you've got to look at it at a segment contribution and the impact to segment contribution because, as you know, concessions, we don't have a labor cost associated with them and obviously we don't carry the inventory, so that margin should just drop down to the contribution line.
Perfect. Okay. Then just in the today comments, you just mentioned a few categories that were doing well, and then just touched on beauty and national brands being the two that had gone backwards. Can you maybe just go into a bit more detail as to what happened in beauty? Was that the impact of the MECCA closures, or is there something else that has driven beauty, which appears to have been a fairly decently strong category for some time?
Yeah. Look, beauty is still a strong category for us. What we saw and what we have seen, including in the half, is there's just an increase in promotion in this category, is one thing. That's not always been the case in beauty. There has been additional promotional activity. If you think about MECCA, I mean, that is obviously part of our strategic reset in terms of beauty. If you actually exclude MECCA, beauty sales are actually up. They're up by 0.5%. Look, we see it's part of our future. There is a strategic reset underway. We are acquiring additional beauty brands, so we expect that trend will turn around in the next period. There's a number of factors driving that. Hopefully that helps.
Yeah. Thank you.
Thank you. Your next question comes from Feras Salekhin from Barrenjoey. Please go ahead.
Hi, guys. Thanks for taking my questions. Just firstly, it's great to see the acceleration in Myer retail comparable sales in the trading update. It looks like comps get a bit tougher to cycle. Just keen to understand how sustainable you think this run rate is, especially in the current macro environment, or are there other factors we should be considering here?
Well, I mean, look, we've been operating in a market over the last period of time, and really the last sort of 18-24 months, where you've had a consumer that has been cautious, where discretionary spend has been tight and which has been heavy on promotion. That's the environment that Myer's been trading over the last few periods, and indeed in the last half that we've just reported on. We would expect that sentiment to continue. Obviously there's a number of external factors at play at the moment and we expect, therefore, the consumer will be cautious, and that promotions will continue in the retail environment. Having said that's the environment that we've been trading with.
The trading update that we've provided for the first seven weeks has obviously been in this against this backdrop. You know, we've seen some encouraging signs. We remain cautiously optimistic about the half, and we'll continue to make sure that sort of focus on getting the right products, engaging our customers and obviously participating in the promotional activities, as we see fit. Obviously we've launched the MEBs now. We do have ambitions for our Myer Exclusive Brands in the second half. As we talked before, responding to David's question, we've obviously traded through in a very well fashion through the old MEBs. We look forward to trading these new Myer Exclusive Brands. We've only had the first drop. The second drop arrives in April, the third in May. We'll continue to trade as best we can considering the broader macroeconomic conditions.
That's clear. Just in terms of the Roselands store, which you guys said is set to be closed in July, can you just help us understand what drove the decision to close this one as opposed to renew it and maybe what the profit contribution was to the group?
Yeah, look, this is a store that's actually been under review for some time. We can provide you with the particulars on that. If you think about what we're trying to do here is obviously we want a fleet that services all of our customers. We've done a lot of work on, I guess, the broader network and the demographics of the market of which Roselands is in, and then we've got a number of other stores which are, I guess, in close vicinity to that one. You should consider that. We are using this as an opportunity, though, to test and learn.
This is a store that will be due to close in July, and we're using it as a way to test different clearance techniques so that, you know, no opportunity is missed on us that we're using this as a way to work out what is the best way to clear. It's trading incredibly well at the moment. It's trading through our clearance. We've moved our Myer Exclusive Brands largely to this center, for example, which means that we can show up with full sizing ranges for each of our Myer Exclusive Brands that we're retiring. It's also trading particularly well on full-priced items as well. We're using this as an opportunity to see how we can better clear stock.
We'll have more to say on that one, but it makes sense for us as a network. We're always gonna be assessing the profitability by store. We're also looking at where there are new opportunities, and this is the right one for the business.
That's clear. Thanks, guys.
Thank you. Your next question comes from Allan Franklin from Canaccord Genuity. Please go ahead.
Morning, Olivia. Morning, Kathy. Thanks for your time. Hoping to just have a quick look into Apparel Brands, please. Noting the 22 store closures and 12 openings, I think seven of which were potentially framed opportunistic. Is that fair? How do we think about the sort of trajectory of those store closures moving forward, or if you can just reframe the lease renewal profile within Apparel Brands.
Yeah, look, I mean, it's an ongoing work in progress. Property is never a set and forget, and as you would expect, we'll continue to optimize our network not only across Apparel Brands, but obviously across the broader Myer Group. We are of the view that it makes sense to continue to assess which of the stores that are performing and, as you say, opportunistically, where are the stores that we grow into. You know, during the period we saw Jeanswest close a number of stores in centers where Just Jeans currently wasn't, and we thought it was the right opportunity to enter markets where we didn't have a brand presence.
Look, our network optimization strategy's underway, and we will continue to assess which are the right stores to close and which are the markets that we need to continue to lean into. Yeah, still 700 stores, and some of the stores are trading particularly well. It also is part of the network optimization, given the work that we've been doing with Just Jeans and already invested in four store overhauls, we're now looking at stages two and three to invest across the fleet because we see that delivers significant returns.
Perhaps just hard to quantify, but how should we be thinking about the foreign exchange, you know, the measures you have in place to hedge forward, how you're sort of buying forward into the next peak period? 'Cause ultimately this should be some FX tailwind starting to flow through the business on a 12-18-month view. If that makes sense.
Allan, it's Kathy. Yes, there is some opportunity for us. We saw some of that come through in the first half as well. Obviously we have a hedging policy in place that we adhere to. It's fair to say that as we look forward, there should be some further opportunity in the second half.
Thank you.
Thank you. Your next question comes from Chami Ratnapala from Bell Potter Securities. Please go ahead.
Good morning, Olivia, Kathy, David, and the team. Well done on getting through most of the first year, should we call, of the transformation journey. Two questions from me, if that's all right. I think firstly, could you talk to any of the early signs? I know it's a bit too soon, but any early signs on the new mix maybe trading wise or, you know, traction among the Myer One customers for the past month also?
Yeah. Look, it is really early days. We obviously only rolled out from February this year. We are literally in only drop one, so it is very early days. There's some initial very encouraging signs. As you recall, Chami, we relaunched five dual gender brands, which means that the brands for women's and men's are the same. That's important because she often shops for him. The brands, Basque and Blaq in particular, are trading particularly well. That's no surprise because they're definitely the more engaged customer within Myer One. I would say, look, very early days. We've got drop two coming in April, drop three in May, and obviously we'll continue to provide more details, particularly at the full- year because we'll actually have a full season.
Early days. We will continue to refine the product, refine the offering, see what we can learn from the data. These are being set up as truly end-to-end brands with a clear brand DNA and definition. It's an exciting part of our transformation. It plays an important role to drive margin. It plays an important role to deliver exclusive ranges to our customers. Early days.
Perfect. Thanks for that. Secondly, on the NDC, Kathy noted that the full implementation would come after the next peak. Hopefully, I heard that correctly. How would-
Yes.
If that's the case, how would-
That's correct. That's correct.
Okay.
We obviously have contingency plans in place with Toll and our 3PL, which operated during the last peak, and we saw an improvement in where our products were being picked from online and with an improvement on not only the cost, but obviously a significant improvement to reduce the disruption that it caused in store at the previous peak. The proof of concept will be up and running at the NDC by this peak. We'll trade through it with that proof of concept, but we will continue to have our 3PL with Toll. We wanna take a conservative approach here and that the full implementation will be on the other side of peak. We wanna make sure that we protect that peak period. We've provided stability, and we've got as much information as possible before we go to full integration, which will happen post-peak.
Right. Okay. On that note, the timing of the cost savings or any COD impacts there or sort of is the same or is there any change to call out there?
There will be some change, Chami, based on the fact that you know, the full solution won't be in place until after peak, but we will get some benefit with the proof of concept being in place through peak.
Perfect. Thanks for that.
Thank you. Your next question comes from Sam Haddad from Petra Capital. Please go ahead.
Hi, good morning. Just to follow on from that question. The investment in the NDC is still the same at AUD 32 million, despite it being after peak season. Just wanted to reaffirm that.
Yeah, we haven't given a change to our investment, but what we have said is that the timing of that investment obviously lines up with deliverables, and therefore there hasn't been a change, but that will be delayed. That's how you should be thinking about it, Sam.
Yeah. The total investment's still unchanged. Okay. Just on the AUD 20 million of benefit, you're still reaffirming that as well? It wasn't in the presentation. I just wanted to double-check.
Yeah. Correct. It's still-
The timing.
The timing of the investment and the benefit is slightly changed, Sam.
Yeah.
The numbers are the same.
Just on the merger synergies of AUD 30 million. In your last presentation, you said by the first half 2027. Is that also pushed back as well given the NDC? Yeah.
Yes, that's correct, Sam. We're still on target to deliver the AUD 30 million. There's a slight movement on that. We'll get some of that next year. There may be a slight movement into the end of FY 2027 for the full benefit that we just spoke about on the synergies, which was AUD 5 million.
My final question, just on the value creation program, can you provide a number in terms of the initiatives you've implemented so far, in terms of the annualized benefit that we should expect for FY 2027. Also in that AUD 14 million, you call that there was some one-off in that. On the slide nine, what can you give a sort of rough estimate of what that one-off is, so we know how to sort of unroll that when we go into FY 2027? Thank you.
Yep. On the Value Creation Program, we will have delivered approximately with our Myer Retail Value Creation and the Myer Apparel Brands Value Creation. By the end of this year, we should have approximately AUD 8 million full- year-
Yep.
On value creation. Obviously that'll annualize into 2027 of approximately AUD 16 million. Half of it has come through in the second half, and then it'll annualize into 2027.
Right.
Your other question was the question on the AUD 14 million. Is that correct, Sam?
Yes, correct.
On the AUD 14 million, the way you got to think about it is that at least half of it or three quarters of it is a one-off.
Right. That's quite material.
Won't be repeated.
AUD 16 million.
Yep.
Value creation benefit plus the amount that one-off unrolling. That's good to know. Thank you.
Correct. Thank you.
Thank you. Your next question comes from James Tracey from Blue Ocean Equities. Please go ahead.
Hi, Olivia, Kathy, and David. Thanks for taking my question. The cash flow of AUD 120 million after the financing payments was much higher than I was expecting. I was expecting about AUD 30 million, so it's nearly a quarter of the market cap. Could you comment on whether this is a one-off working capital gain or if it's more indicative of the cash generative nature of Apparel Brands, which we've really seen the first consolidation of in the peak trading period? Thank you.
It's a combination of both, James. It is the way I would think about it if I were you.
Yeah.
Is it there's the Apparel Brands component, and then there is an element of working capital impact at the end of the half.
Okay. Then just with regards to that, you know, you've talked a bit in the past about seasonality, and it looks like probably the second half EBIT should be proportionally higher than in the past because of having Apparel Brands in the mix and the phasing of these value creation initiatives. Yeah, just could you comment, given that, looks like consensus EBIT is a very wide range between AUD 70 million and AUD 180 million on FactSet. You've just delivered AUD 113 million in the first half. It seems reasonable to me that you could do sort of AUD 60 million based on the guidance you've given. Could you comment on where you see the second half, first half split and, you know, whether or not that relates to positive free cash flow after the finance leases in the second half?
Yeah. What I would say to you at this point, James, is that you're pretty close on your view of EBIT in the second half.
Yep. Okay.
What I would-
And so that-
What I would also say is we have an ambition in the second half at the top line based on the relaunch of the MEBs. It's an ambition that we've not had in prior years. That's what's driving that EBIT number in the second half.
Okay. Basically what you're saying is you need to hit the numbers, the targets you've set out on that MEBs relaunch to get to that number. Is that fair?
It's a big driver of that, yes.
Okay. All right. That's lovely. Thank you, Kathy.
Thank you. Your next question is a follow-up question from Garth Francis from MST Marquee. Please go ahead.
Thank you very much for taking the follow-up question. Just on the trading update, the 2.7% comps, is that again driven by the strength in concessions, or are you seeing the national brands as also pick up in that number?
It is driven by the growth in concessions and also some of the positive signs we're seeing in MEBs on the relaunch of the new product.
Terrific. Can you just talk to the Marketplace? You've spoken about that a few times and highlighted the strength of the growth in contributing to the online sales. Is there a margin impact, and how should we think about that if online is growing largely as a result of the Marketplace growth?
Look, the way that we should think about it is you should be thinking about it as an additional channel and an important role in driving greater top line for e-com. Yes, obviously the margin mix is different, but we're going to be quite selective about how we acquire the right brands, what the overall assortment is within Marketplace and you know, where this is not going to be an open loop, so to speak. This is gonna be very curated in terms of making sure we've got the right product mix by right vertical. I'll give you an example. Christmas trees.
You know, we sold a lot of Christmas trees over Christmas, and these are large items, and it was everywhere up to AUD 1,500 of a Christmas tree all the way down to AUD 89 on a Marketplace, which is a Christmas tree. If we didn't have Marketplace as an offering, we wouldn't been able to participate at the lower end. We're actually sure customers trade up. We keep a close eye on this around what is the behavior.
Where do the customers enter the site? What are they looking at different, you know, different verticals, Christmas trees just being one of them. It's a high-volume game, and you need a broad spread. If it wasn't for Marketplace and an offering, you wouldn't have had that full spread at a price point offering. It allows us to participate in good, better, best. It will be something that we continue to talk to you about. It obviously launches in May. Mirakl is a great partner. They've been partnering with lots of other department stores and players globally. We're getting a huge amount of insights into what we're seeing globally in the trends around from a marketplace perspective.
It is an area that we are focused on, and we believe has significant potential for us, but we will be doing it in a very focused way. We just launched, for example, Samsung is a new partner of ours on Marketplace. This is an area that we haven't played in before. We used to obviously have back in the day, many years ago, you know, we used to have a greater assortment of electrical items and telecom items. We don't. This gives us a way to participate in a market. It's driven by Myer One. We're trusted by our customer, so why not lean into these areas that we can trade well in? This is all opportunity and upside, and it gives us breadth in verticals where we currently don't have it.
The way you've got to think about it, Garth, financially is it's at segment contribution. It's again, just upside.
Okay. Does it allow you to get around some of the exclusivity deals? I imagine if there's a marketplace that you may be able to access brands that you may not have otherwise, or that may have other deals elsewhere.
Exclusivity isn't necessarily the driver for us. It's more around we're looking at the data and understanding where we've got trust and where we have a right to play, but where we don't have an assortment currently because it doesn't make sense from a productivity perspective to be holding it in a store. Let's talk about babies. We sell children's wear, baby wear clothing. Currently, we don't have those larger, bulkier items like prams, for example, or like high chairs or like cots. It gives us an opportunity to build out the baby category or home. Home is a strength of ours. We've seen double-digit growth, as is electrical, but let's just talk about home. We've got great brand offering in terms of towels, in terms of sheet and bedding.
Mattresses, we could do more through absolutely backing our partners in store, but also having a far greater assortment online, including soft furnishings, rugs, lamps, these sorts of products that we have a right to play. Our brand has strength in the home category, so Marketplace allows us to work with different partners in a different way and really build out that overall assortment and truly own home as a broader category.
Makes sense. Thank you.
Thank you. That does conclude our time for questions. I'll now hand back to Olivia for any closing remarks.
Thank you everyone for joining the call today. We do appreciate your support. We appreciate your time, and we look forward to meeting many of you one-on-one in coming days. Thanks again, everyone.
That does conclude our conference for today. Thank you for participating. You may now disconnect.