Supply chain shakeup allows Myer to pay $100 million in debt

Filed in archive News on December 28, 2006

A supply and retail logistics program that reduced inventory levels has allowed the Myer department store chain to pay down $100 million of debt early.

When the new management of Myer, bought by a private equity group led by Texas Pacific Group, started a stock take in May, they recognized how overstocked the chain was. Clearance sales from late June has enabled Myer not just to clear excess stock from its stores, but also permanently reduce its inventory levels.

Some department store managers had been hiring expensive space just to hold unsold stock while they took on new stock from the company's distribution centers. A new supply chain system and retail strategy has cut down the inventory held in stores as well as in DCs.

This now means that 20 warehouse and storage facilities are redundant, a major saving in Myer's cost base. Part of the savings have been spent on better staffing and stocking (including reducing the number of lines) of the stores to improve stock turns.

Despite paying well above competing bidders for Myer, the new owners have been able to pay back $25 million of debt in September and today pay another $100 million - 19 months early.

With the excess stock almost out of the system, Myer is now able to buy stock closer to sale periods, which enables better choice of products, which should mean less excess unfashionable stock. Myer CFO Hisham El-Ansary says the initial focus of management has been to "streamline inventories and improve the stock turns".

(Source: QBR)