This report would be including the strategic recommendation plan of the organization named Myers which is a chain of departmental stores in Australia. The target consumers for the organizations belong to the mid-to-up market. The product portfolio of the organization is diverse and consists of the various segments such as men, children and women clothing, accessories and footwear, fragrance and cosmetics and various other products. They are also the owner of the designer womenswear brand, Sass & Bide. Myer is the largest departmental store in Australia in terms of the number of store count and the revenue that has been generated. David Jones is the market competitor of the organization. The organization has successfully welcomed the customers into their amazing department store, making sure they are offering world class services and merchandise to them. Today also, they are successfully continuing their legacy born of history, being Australia’s most favorite department store (Myer 2017). In 2016 the company was able to generate a total revenue of $2,808,557,000, which included sales and other revenue forms too. They have an employee strength of 12500 in Australia, which includes employees from all their subsidiaries that are directly under the control of the organization (Ibisworld.com.au 2017).
Inside the department stores industry, the operators have been struggling for the last five years because of the weak retail environment and the low levels of consumer sentimentality, which has resulted in the instability of the global fiscal markets. Consumers have turned out to be largely price conscious and they have started becoming reluctant in spending their discretionary income in place of putting preference of paying down debt and boosting their savings levels. It is expected that the industry revenue would be falling at an annualized 0.9% across the five years through 2017-18, rounding off to a total of $18.3 billion (Ibisworld.com.au 2017). In 2016, Myer has been able to deliver a Net Profit After Tax of $69.3 million, all in line with their guidance to the market.
Myer has stores across 60 prime retail locations all over Australia. Their stores are visited more than 130 million times every year by the customers, with a little help from their loyalty program that has more than five million members. The brand is known for providing fresh, re-energized and relevant range of products and bettered services, with the ever present superior in-store experience for their customers and strong omni-channel offering. They have a significant footprint of stores that get complemented by their well-known brands and get supported by their online, mobile and digital platforms. Myer is completely focused on the provision of motivation for their employees and inspiration for their customers, all with the help of their team members, their 50,000 shareholders, their 1,200 suppliers all over the world and the different communities they regularly engage with their strong brand presence (Investor.myer.com.au 2017). The Mew Myer has been constructed on the base of the most desired brands and within just 12 months they have been able to install new or updated brand destinations and acquired string growth in concession sales.
General performance
|
Name |
Myer Holdings Limited |
|
Stock Code |
MYR |
|
Website |
https://www.myer.com.au |
|
GICS Sub-Industry |
Department Stores |
|
Market Cap ($M) |
612 |
|
Equiv. Shares (M) |
821 |
Table 1
(Source: InvestSMART 2017)
Current price data
|
Current Price |
$0.745 |
|
Open |
$0.750 |
|
High |
$0.755 |
|
Low |
$0.740 |
|
Last Close |
$0.745 |
|
Volume |
2159366 |
|
Price Movement |
– ( No change ) |
Table 2
(Source: InvestSMART 2017)
Per Share
|
Year to Jun |
Sales |
Cashflow |
Earnings |
Dividends |
Franking |
Book Value |
Average |
Relative P/E |
Shareholder Return |
|
2017 |
$3.19 |
18.2 ¢ |
5.2 ¢ |
5 ¢ |
100% |
$1.31 |
22.2% |
140.5% |
-40.2% |
|
2016 |
$3.53 |
19 ¢ |
9.3 ¢ |
5 ¢ |
100% |
$1.35 |
11.6% |
69% |
15.1% |
|
2015 |
$4.43 |
15.5 ¢ |
12.4 ¢ |
6.6 ¢ |
100% |
$1.38 |
12.5% |
79.5% |
-40.2% |
Table 3
(Source: InvestSMART 2017)
|
FINANCIAL SUMMARY ($M) |
FY2016 |
FY2015 |
Change |
|
Total Sales |
3,289.6 |
3,195.6 |
+2.9% |
|
Operating Gross Profit |
1,274.3 |
1,290.4 |
(1.2%) |
|
Operating Gross Profit margin |
38.7% |
40.4% |
(164bps) |
|
Cost of doing business (CODB) |
(1,068.1) |
(1,067.2) |
+0.1% |
|
Earnings before interest, tax, depreciation, amortization (EBITDA)* |
206.2 |
223.2 |
(7.6%) |
|
Earnings before interest and tax (EBIT)* |
113.5 |
133.5 |
(15.0%) |
|
Net Profit After Tax (NPAT)* |
69.3 |
77.5 |
(10.6%) |
|
Implementation costs associated with New Myer (post tax) |
(8.8) |
(47.7) |
|
|
Statutory NPAT |
60.5 |
29.8 |
+103.0% |
Table 4:
(Source: Myer 2017)
Capital Structure
|
Total Debt |
Interest |
Percent Debt |
Preferred Stock |
Share Equity |
Percent Equity |
|
|
$143,367 |
$11,259 |
$143,367 |
12% |
$0.00 |
$1,072,868 |
88% |
Table 5
(Source: Myer 2017)
Historical Financials
|
|
2017 |
2016 |
2015 |
|
Revenue ($M) |
2,623.4 |
2,780.6 |
2,772.4 |
|
Operating Margin (%) |
6.1 |
7.4 |
7.9 |
|
Depreciation ($M) |
-63 |
-65.1 |
-62 |
|
Amortisation ($M) |
-26 |
-23 |
-22 |
|
Net Profit Before Abs ($M) |
42.5 |
73.5 |
77.5 |
|
Net Profit After Abs ($M) |
11.9 |
60.5 |
29.8 |
|
Income Tax Rate (%) |
60.5 |
25 |
39.2 |
|
Net Profit Margin (%) |
1.6 |
2.6 |
2.8 |
|
Employees ($T) |
|||
|
Long Term Debt ($M) |
143.4 |
147.3 |
441.2 |
|
Shareholders Equity ($M) |
1,072.9 |
1,107.8 |
863 |
|
Return on Capital (%) |
4 |
7 |
7 |
|
Return on Equity (%) |
4 |
6.6 |
9 |
|
Payout Ratio (%) |
97 |
54 |
53 |
Table 6
(Source: Myer 2017)
Balance Sheet
|
|
2017 |
2016 |
2015 |
|
Cash ($M) |
30.6 |
45.2 |
53.3 |
|
Debtors ($M) |
4.82 |
10.02 |
3 |
|
Other Debtors ($M) |
12.27 |
18.92 |
10.58 |
|
Prepayments ($M) |
10.51 |
8.94 |
16.78 |
|
Inventories ($M) |
372.4 |
396.3 |
381.9 |
|
Current Investments ($M) |
.35 |
15.21 |
|
|
Other Current Assets ($M) |
|||
|
Total Current Assets ($M) |
430.6 |
479.7 |
480.8 |
|
Receivables ($M) |
|||
|
Inventories ($M) |
|||
|
Property, Plant & Equipment ($M) |
1,000 |
926.4 |
891.9 |
|
Accumulated Depreciation ($M) |
-539.8 |
-481 |
-422.9 |
|
Intangibles ex. Goodwill ($M) |
520.6 |
527.5 |
539.5 |
|
Goodwill ($M) |
465 |
376.6 |
376.6 |
|
Future Income Tax Benefit ($M) |
27.1 |
18 |
|
|
Non-Current Investments ($M) |
9.28 |
||
|
Other Non-Current Assets ($M) |
2.09 |
2.27 |
2.61 |
|
Total Non-Current Assets ($M) |
1,448 |
1,388 |
1,406 |
|
Total Assets ($M) |
1,879 |
1,868 |
1,887 |
|
Accounts Payable ($M) |
379.7 |
400.6 |
387.2 |
|
Provisions ($M) |
96.9 |
108.4 |
86.3 |
|
Short Term Debt ($M) |
|||
|
Other Current Liabilities ($M) |
10.41 |
11.61 |
7.87 |
|
Total Current Liabilities ($M) |
487 |
520.6 |
481.4 |
|
Creditors ($M) |
|||
|
Long Term Debt ($M) |
143.4 |
147.3 |
441.2 |
|
Provisions ($M) |
99.4 |
22.6 |
25.9 |
|
Other Non-Current Liabilities ($M) |
75.9 |
69.7 |
75.1 |
|
Total Non-Current Liabilities ($M) |
318.6 |
239.5 |
542.1 |
|
Total Liabilities ($M) |
805.7 |
760.1 |
1,023.5 |
|
Share Capital ($M) |
739.3 |
739.3 |
524.8 |
|
Reserves ex. Share Premium ($M) |
-8.61 |
-11.06 |
2.9 |
|
Share Premium Reserve ($M) |
|||
|
Retained Profits ($M) |
342.1 |
379.5 |
335.4 |
|
Other Shareholders Equity ($M) |
|||
|
Convertible Equity ($M) |
|||
|
Outside Equity Interest ($M) |
|||
|
Total Shareholders Equity ($M) |
1,072.9 |
1,107.8 |
863 |
Table 7
(Source: Myer 2017)
Cashflow
|
|
2017 |
2016 |
2015 |
|
Customer Receipts ($M) |
2,932 |
3,101 |
3,096 |
|
Net Operating Cashflow ($M) |
149.3 |
149.5 |
96.9 |
|
Net Investing Cashflow ($M) |
-109 |
-58 |
-62 |
|
Net Financing Cashflow ($M) |
-54 |
-99 |
-55 |
Table 8
(Source: Myer 2017)
Market & Earnings
|
|
2017 |
2016 |
2015 |
|
Market Cap ($M) |
624 |
1,096 |
738 |
|
Net Gearing (%) |
10.5 |
9.2 |
44.9 |
|
Net Interest Cover (%) |
6.62 |
8.09 |
5.87 |
|
Dividend Yield (%) |
6.6 |
3.8 |
5.6 |
|
NTA Per Share ($) |
.11 |
.25 |
-.09 |
|
EBITDA ($M) |
160.2 |
206.2 |
217.9 |
|
EBIT ($M) |
71.6 |
117.7 |
133.5 |
|
EBT Before Abs ($M) |
60.8 |
103.2 |
110.7 |
Table 9
(Source: Myer 2017)
These financial data shows that there has been growth in the performance of the organization. The sales of Myers have increased by 2.9 %. The organization has been able to reduce their cost by using a business model which is simplified and is focused on narrow brand ranges. This is done to support the new strategies that has been implemented by the organization. The implementation of the new strategy has been effective for the organization as it has helped in increasing the amount of sales for the organization. The organization is expecting to grow more than 3% each year for the next 5 years (Myer 2017). The cashflow of the organization have increased and the amount of cash coming in is predicted if the strategy can be implemented properly. The balance sheet, cashflow statement, the market earning show that the organization had been able to make huge profits in the fiscal year of 2016.howvere, the figures of 2017 suggest that the organization is facing problems in implementing the strategies they have developed. Thus, the organization will find new ways of implementing strategies in a better way in the market.
Enhanced omni-channel capacities, reallocating space to mainstream brands, and more adaptable instore work are entering activities in the ‘New Myer’ methodology uncovered today. Supported by more than $600 million venture, the five-year design will put more noteworthy concentrate and speculation on the organization’s best performing stores and most profitable clients. Myer will raise $221 million from the capital markets to help pay for an update of its retail chains after a 69.7 for every penny droop in entire year benefit (Inside Retail 2017). The retailer says the completely endorsed two-for-five quickened ace rata non-renounceable qualification offer will help subsidize a $600 million interest in absolute capital and usage costs. Myer, which had effectively reported it was dumping 100 brands to clear a path for new ones so that they can increase the sale of the organization, said net benefit for the 52 weeks to July 25 was down to $29.8 million from a year ago’s $98.5 million.
The organization had efforts to add financial stability to the organization making the changes by making it more flexible. The organization has dropped 100 brands which suggest that the organization is starting a fresh by making changes to the overall structure and the business model of the organization. The organization made their efforts to bring about a transformation by starting form scratch and reinventing the strategies and requirements of the stores in the market. The organization is focusing on providing better experience to the consumers in the market. The organization had allocated more amount of space to the product line which are underperforming in nature so that they generate more revenue from the market (Myer 2017). The experience of the consumer is one of the important factor in the retail industry which will help the organization to gain competitive advantage in the market. The retail outlets consist of restaurant, priority stores and cafes and other facilities such as Wi fi, fitting rooms, rolling and lighting. These facilities help to enhance the overall experience of the consumers.
The marketing channel of the organization is an important aspect which will be used various number of consumers in the market. This has helped to double the revenue of the organization but it is relatively difficult to implement the strategy of the organization. They are facing little in providing the consumers with a better experience in the market. The network of the store has been optimized so that provide better sales (Hill et al. 2014). The key support functions of the organization will be reorganized so that the new strategies can be aligned according to the priorities. The organization is try to create a culture which is focused on the future goals and objectives. The organization is trying to investment new processes, systems and technologies which will ease the operations and increase the efficiency of the organization.
Thus, form the above mentioned it is recommended that the organization focuses on implementing new technologies that has been available in the market which is responsible for making improvements in the overall efficiency of operation and provide the consumers in the market with a magnificent experience. The organization will have to simplify the business model and keep on using backward integration to make continuous improvements. The continuous improvements in the business model of the organization is one of the ways of gaining competitive advantage in the market (Wheelen and Hunger 2017). Service is very impore5tanat in this industry so it advised the organization take regular feedbacks for the consumers so that they can identify the loopholes and make improvements in the overall experience of the consumers in the market. The marketing of the products is also a crucial aspect and the organization is using omni channel marketing to further penetrate in the market. However, the implementation of the omni channel marketing is tough for the organization and is facing problems. Thus, the organization will have to find a solution of implementing omni channel marketing. However, it is advisable that the organization focuses on digital marketing and use social media platforms as an effective tool for improving the sustainability and gain competitive advantage in the market. The organization will have to focus on the long-term sustainability and in order to do so Myer will have to set their priorities right and implement the strategies based on the current needs of the organization. The improvement in the ambience of the stores is important and the organization has been working on it to provide the consumers with a better experience in the market.
The formulation of the strategy is the first step in reaching the goals and objectives of the organization. However, implementation of the chosen strategy is will help the organization gain success in the market. The chosen strategies will have to be implemented in a better way so that the organization can reach their desired goals. The available resources for the organization will have to be disbursed to the important strategies so that they can be executed in an effective manner. The policies in the organization will have to be created in such way that encourages the various strategies that has to be implemented (Rothaermel 2015). The organization will have to constantly monitor all the processes in the organization so that they are able to make changes to the any defects and continuously make improvements in the business model of the organization. The reward structure of the organization will have to be linked with the accomplishment of results so that the exact evaluation can be done. The workforce is very important factor in providing the consumer with better experience so management of the human resources is also crucial in the success of the organization. The organization will have to use strategic leadership where the leader plays an important role in guiding the organization towards the goals and objectives of the organization.
The financial data of the organization suggest that they are facing issues in controlling their strategic process so monitoring and control of the processes is the only way of improving the productivity of the organization (Bettis et al. 2016). The performance of all the processes will have to be measured with the help of statistical tool to identify the effectiveness of the strategy so that the organization can make changes to the shortcomings and handle them before the issues gets too much inflated.
Conclusion
Thus, it can be concluded that Myer is using effective strategies to improve their consumer base and gain competitive advantage in the market. However, even though the organization was able to formulate the strategies in an effective way there was lack in the implementation of the strategy. The financial data shows the dip in the sales and the profits of the organization and this can be overcome by following the above suggested strategies and proper monitoring and control of the organizational processes.
References
Bettis, R.A., Ethiraj, S., Gambardella, A., Helfat, C. and Mitchell, W., 2016. Creating repeatable cumulative knowledge in strategic management. Strategic Management Journal, 37(2), pp.257-261.
Hill, C.W., Jones, G.R. and Schilling, M.A., 2014. Strategic management: theory: an integrated approach. Cengage Learning.
Ibisworld.com.au 2017. Department Stores in Australia Market Research | IBISWorld. [online] Ibisworld.com.au. Available at: https://www.ibisworld.com.au/industry-trends/market-research-reports/retail-trade/other-store-based-retailing/department-stores.html [Accessed 17 Oct. 2017].
Ibisworld.com.au 2017. Myer Holdings Limited – Retail. [online] Ibisworld.com.au. Available at: https://www.ibisworld.com.au/australian-company-research-reports/retail-trade/myer-holdings-limited-company.html [Accessed 17 Oct. 2017].
Inside Retail (2017). ‘New Myer’ strategy revealed – Inside Retail. [online] Inside Retail. Available at: https://www.insideretail.com.au/blog/2015/09/01/new-myer-strategy-revealed/ [Accessed 17 Oct. 2017].
Investor.myer.com.au 2017. Myer Investor Relations. [online] Investor.myer.com.au. Available at: https://investor.myer.com.au/Investor-Centre/ [Accessed 17 Oct. 2017].
InvestSMART 2017. Myer Holdings Limited. [online] InvestSMART. Available at: https://www.investsmart.com.au/shares/asx-myr/myer-holdings-limited/financials [Accessed 17 Oct. 2017].
Myer 2017. 1899-1930. [online] Myer. Available at: https://www.myer.com.au/c/about-myer/the-company/about-us/content-1899-1930.html [Accessed 17 Oct. 2017].
Myer 2017. Myer Annual Report. [online] Available at: https://investor.myer.com.au/FormBuilder/_Resource/_module/dGngnzELxUikQxL5gb1cgA/file/Myer_Annual_Report_2016.pdf [Accessed 17 Oct. 2017].
Myer 2017. Myer’s new startegy. [online] Available at: https://investor.myer.com.au/FormBuilder/_Resource/_module/dGngnzELxUikQxL5gb1cgA/file/MYR-New-Strategy-media-release-010915.pdf [Accessed 17 Oct. 2017].
Rothaermel, F.T., 2015. Strategic management. McGraw-Hill Education.
Wheelen, T.L. and Hunger, J.D., 2017. Strategic management and business policy. pearson.
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