Myer to expand exclusive brands

Department store owner Myer (ASX: MYR) is reported to be running the ruler over a purchase of high-fashion women’s wear label Lisa Ho. Lisa Ho, which has suffered trading difficulties and recently entered voluntary administration, could be a sensible addition to Myer’s expanding portfolio of acquired brands. Myer would be looking to snap the brand up out of administrator’s hands, however it is likely to face some stiff competition from trade buyers and also from private equity.

CEO Bernie Brooks and his team at Myer have put their primary focus on sales growth, which is a different strategy to CEO Paul Zahra’s over at competitor David Jones (ASX: DJS), who has focused first and foremost on gross profit margin. Although sales have been the key objective, presentations by Myer show that improvements in the gross margin have been driven by a focus on increased sales of exclusive brands items. Myer has spent over $50 million purchasing a number of brands outright including Trent Nathan and Sass and Bide. The company also has enhanced exclusive supplier arrangements with a number of other brands, such as Material World by Madonna.

It would appear a clever move for Myer to expand its ownership and exclusive rights to high-end fashion brands such as Lisa Ho, given the higher margins which can be achieved. As OrotonGroup (ASX: ORL) and Premier Investments (ASX: PMV) via their Smiggle brand have learned, there are salivating profits to be made.

Foolish takeaway

Retailers have been out of favour with investors for a few years now, although that has changed recently. While they still face some headwinds, better days could lie ahead and their dividend yields offer added appeal.

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Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.

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