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Myer, Australia's biggest department store chain, will accelerate the opening of new outlets and double capital spending as it targets A$5 billion ($5.8 billion) in annual sales.
The store network will rise to 80 outlets from 61 within the next five years with A$150 million to be spent annually on refurbishments and computer systems, the Melbourne-based company said yesterday. Myer also reported a nine-fold surge in second-half earnings.
Accelerating sales and higher earnings may make it easier for buyout firm TPG to sell the retailer back to the public, which Myer chairman Bill Wavish said might occur within two years.
The chain, which TPG bought for A$1.4 billion in June 2006, has already returned A$560 million to its new owners.
"The changes we've made over the past 16 months have been about getting the business metrics right, and building a strong foundation for the future," Wavish said. "The next 12 months will see the completion of that base."
Earnings before interest and tax rose to A$57 million in the six months ended July 28 from A$6 million a year earlier.
Net income for the year was A$84 million, with no year-before figure provided as the company was formerly a unit of Coles Group.
Chief executive officer Bernie Brookes has cleared out old inventory, cut administrative expenses and renegotiated with suppliers to lower costs since he took over.
He set 101 business improvement initiatives, including store layout redesigns, the introduction of a Myer Visa credit card, better trading terms from suppliers, expanding the Myer One loyalty programme, and scrapping poor-performing promotions.
Myer's margin, which measures earnings as a proportion of sales, rose to 5.5 per cent from 2.3 per cent 12 months earlier. The company is aiming for at least 6 per cent in 2008.
Capital spending will rise to A$150 million annually from fiscal 2009, more than double the company's previous A$72 million forecast, to refurbish stores and introduce more efficient supply systems.
Myer opened three new stores in the past year, with four more expected in fiscal 2008. A further 10 will be open by 2010 with five more planned after that.
TPG, formerly known as Texas Pacific Group, owns 88.2 per cent of Myer. The descendants of Sidney and Elcon Myer, who founded the firm in Bendigo in 1900, own 8.5 per cent and management control the remaining 3.3 per cent.
- Bloomberg
