Finance Consumer Myer back in the black, but sales continue to slip

Myer back in the black, but sales continue to slip

myer profit 2019
The iconic department store chain's workers have been sent home without pay. Photo: Getty
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Myer shares have climbed nearly 12 per cent on a better-than-expected full-year profit, but the department store chain’s sales continue to fall.

The company eked out a narrow full-year profit of $24.5 million following an improved digital contribution and cost-cutting program, with underlying profit beating consensus forecasts with a 2.2 per cent rise to $33.2 million.

But while the company’s bottom line, announced on Thursday, was an improvement on last year’s writedown-driven $486 million loss, total revenue for the 12 months to June 30 fell by 3.5 per cent to $2.99 billion.

Comparable store sales fell by 2.9 per cent over the full year, which Myer said reflected its focus on profitable sales as opposed to discounting, and by 3.8 per cent in the second half.

The full-year decline slowed to 1.3 per cent once Apple products, which were removed in May, were excluded.

Partly offsetting this were improvements in merchandise and store layouts and a 21.9 per cent growth in full-year digital sales to $292.1 million.

Net debt reduced by $69 million to $39 million on June 30, while the company again refrained from paying a dividend.

Shares in the company rose by 11.8 per cent to a near three-month high of 63.7 cents at 10.26am (AEST), and were still 8.77 per cent higher at 62 cents by 10.38am.

Chief executive and managing director John King said he’d never known a more challenging time in his 35 years in retail – though he did not believe the nation was on the cusp a recession.

“We know it’s a challenging time for retail globally … but I wouldn’t use the ‘R word’ in terms of what we think about the economy at the moment,” Mr King said.

Mr King – who was appointed in May last year – hailed the department chain’s cost management. He said it had saved $32.6 million through a new staffing model, a more focused marketing spend, and reduced store occupancy.

Since July 2018, Myer has either closed or announced the closure of 29,000 square metres in store gross lettable area. A further 5-10 per cent is under active discussion.

Mr King admitted there was more to be done to transform the business in the interests of customers and shareholders.

“In addition to cost savings expected with further space reductions, material opportunities remain to reduce costs in supply chain and fulfilment, as well as other non-customer facing activities,” he said.

Many retailers are hurting as tough trading conditions prevail amid weak household consumption and stagnant wage growth.

This includes Myer’s traditional rival David Jones, which posted a 42 per cent decline in full-year operating profit last week.

Official figures this week showed retail sales at department stores declined in June for a seventh month out of 12.

A services industry survey also suggested retail activity contracted for the ninth month in a row in August, suggesting stimulus from tax cuts and lower interest rates is yet to flow through.

Myer did not offer concrete guidance on Thursday but said a “significant brand refresh” was underway with 40 new brands to arrive in-store by Christmas.

These include Oasis, Warehouse, Karl Lagerfeld Paris, Selected Femme, Selected Homme, Vero Moda, Fiorucci, Rotate by Birger Christensen, Jack London, Twisted Tailor and Acqua di Parma.

Myer exited the Country Road brand in the first quarter of this financial year. It is also moving away from Politix and Mimco.