‍👉 Background: Myer is an Australian department store founded in 1900, selling everything from clothing and beauty to homeware and electronics. Last year, it made a near billion dollar acquisition of Apparel Brands - the wardrobe behind Just Jeans, Jay Jays and Portmans, Dotti and Jacqui E. This deal was made to boost Myer’s profit margin.

‍👉 What happened: Despite the market’s initial positive response to the acquisition, the glamour has worn off FAST, and Myer warned that its net profit has fallen 30% compared to last year. They reckon it’s been a tough environment for retail brands:

• Slower consumer spending
• Significant investment in its new distribution centre
  
• Apparel Brands also saw a 1.7% drop in sales in its first 6 months under Myer

👉 What else: The Myers’ execs claim that FY25 was simply a “transition year”, and that this year should be considered a free-kick year… because it’s just setting the business up for future growth.

What's the key learning?

‍💡Big-ticket investments are always tricky to sell to investors because the costs hit immediately, while the pay-off may not show up for years.

💡Sometimes businesses need to cop short term losses in order to position themselves for long term success. That’s the bet Myer made when it spent heavily on a billion-dollar acquisition and upgraded its supply chain. The problem is, if execution isn’t done well, then investor confidence can evaporate fast.

💡Myer’s new distribution centre has already faced delays and extra costs. In fact, the operational problems at the new distribution centre cost Myer $16 million in earnings last year and will require an additional $32 million to get it to its prime... so Myer needs to prove to investors soon that its makeover is actually turning the corner.