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Myer sales growth slows

Department store owner Myer Holdings (ASX: MYR) has reported a slight rise in sales for the quarter to March 31, and remains cautious about the outlook for retail trading.

Third quarter sales rose 0.5% to $652.5 million – the company’s fourth consecutive quarter of comparable sales growth. Key categories of menswear, cosmetics, womenswear and childrenswear were again the strongest performers during the quarter.

Myer opened one new store, and said it had seen a positive response from customers. Earlier in May, the company launched a new premium platinum tier for its most highly valued Myer One loyalty card members. The top 2,000 customers were invited to join the program, which offers exclusive rewards and experiences.

Loyalty programs can pay big dividends for retailers, Kathmandu Limited (ASX: KMD) has previously reported that more than half of its sales are to members of its loyalty club. Around 70% of Myer’s sales are to its Myer One cardholders.

Myer’s recent success may be partly to blame for the lack lustre results Wesfarmers Limited (ASX: WES) is experiencing in its discount department store, Target. While Wesfarmers’ Kmart competes on a similar level to Woolworths’ (ASX: WOW) Big W at the discount end of the market, and Myer roughly competes against the more up-market David Jones Limited (ASX: DJS), Target is really in no-man’s land. Wesfarmers faces a tough time trying to turn around Target.

Retailers across the board are still facing a difficult environment, and Myer’s third quarter sales growth at 0.5% was much lower than its second quarter sales growth of 2.1%. The retailer continues to focus on what it calls its ‘omni-channel’ offering, which allows customers to buy products through several different mediums, such as traditional bricks-and-mortar stores as well as online and mobile.

Foolish takeaway

While its pleasing to see positive sales growth, the slump from the previous quarter may be cause for concern, and shareholders will be closely watching the final quarter’s sales figures.

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More reading

The Motley Fool’s purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead.  This article contains general investment advice only (under AFSL 400691). Motley Fool writer/analyst Mike King owns shares in David Jones and Woolworths.

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