Department giant Myer has reported a 37 per cent drop in first-half profit, weighed down by restructuring cost, redundancies and the exit of Apple products and Country Road Group brands.
The company has also warned the tough times will continue as the coronavirus outbreak exacerbates the pain of an already soft consumer environment.
Chief executive John King said shoppers were already steering clear of the shops before virus fears emerged, with general footfall subdued for most retailers.
He said that like other retailers, Myer enjoyed a spending spike during major trading events such as Black Friday, but traffic was otherwise soft in the six months to January 25.
“People are generally tight on spending but on Black Friday they do come out,” Mr King said in an analyst call on Thursday.
Mr King said the company would continue to push online sales as the coronavirus threatened to keep people at home.
The company’s online sales grew by 25.2 per cent to $168.2 million during the half – but not enough to counter in-store declines.
Myer’s profit fell to $24.4 million in the six months to January 25 as total sales dropped 3.8 per cent to $1.6 billion.
“I can’t tell you what the future holds; we’re trying to drive online as hard as we can because if people are scared to come out, hey, they can shop at home,” Mr King said.
Mr King also said the supply chain impact of the coronavirus was being managed by teams in Hong Kong and Shanghai.
“The team are focused on mitigating the impact of delays to the planned delivery of merchandise,” he said.
He was reluctant to offer a long-term outlook but said the virus was a potential cashflow opportunity in the short term.
“[It’s a chance to] de-stock and refocus on inventory and what we really need,” he said.
The company’s womenswear segment was cited as a particular disappointing during the first half, especially in brands exclusively stocked by Myer.
Total comparable store sales grew by 0.4 per cent when excluding Apple and Country Road Group sales.
Apple products were taken off Myer’s shelves last May, while the company exited the Country Road brand in the first quarter of FY20.
Mr King said improvements in womenswear and exclusive brands were underway but would not flow through until FY21.
Myer has also shuttered its “clearance floor” concept and is targeting another 73,000 square metres of reduced floor space in coming years.
The company booked a net $15.2 million in first-half costs associated with brand exits, clearance floor closures, and redundancy payouts after the company cut 35 head office staff in January.
Stripping these costs out, net profit climbed 0.4 per cent to a still-underwhelming $41.5 million.
The company’s dividend continues to be suspended.
Shares in the company – which were worth $3.05 in April 2015 before dropping 90 per cent over five years – were up 1.45 per cent to 35 cents by 1020 AEDT on Thursday.
The Hornsby store closed in January while refurbishments have commenced at the Myer stores in Cairns and Karrinyup, underpinned by significant landlord contributions.
During the second half, a major upgrade of the Sydney City ground floor and atrium will begin. Work will also commence at Myer’s Belconnen store in Canberra to reduce space, followed by a refurbishment.
Upgrades are also planned for the Albury and Ballarat stores.
Myer’s first-half result follows on the heels of another poor interim showing by rival David Jones last month, where operating profit dropped nearly 60 per cent to $20 million on increased discounting and poor sales.