As expected, department store group Myer Holdings has produced a smaller profit on lower sales for the 2011 year, and warned of flat sales and a 10% drop in earnings for the current year.
It’s an outcome and outlook that we will hear repeated in the next 10 days by Myer’s rival David Jones which has already revealed a terrible 4th quarter sales performance.
The weak sales and profit outcome from both department stores has already sparked a lot of nonsense from the media and analysts about the malaise/weakness/recession in retailing.
But this commentary has neglected to point out that Myer and David Jones are competing in a small part of retailing: the mid to upper levels of department stores, which have been overtaken by cheaper opponents further down the price scale, or by the internet.
Just look at the two department store operators when you compare their sales to competitors.
Myer had sales of $3.158 billion in the 2010-11 financial year, David Jones $1.958 billion.
That puts them at the bottom of general retailing by sales: Big W, the general merchandising arm of Woolworths had sales of $4.193 billion in the 2011 financial year.
Wesfarmers’ Kmart’s sales were $4.03 billion. Target, the mid-range department store arm of Wesfarmers, had sales of $3.78 billion.
If you spread the comparison further, Bunnings, the hardware arm of Wesfarmers had sales of $6.78 billion, while Harvey Norman had total sales in the 2011 year of $6.64 billion (includes company and franchised owned outlets).
Last November’s interest rate rise by the Reserve Bank and the add on increases from the banks, crimped consumer confidence and sales growth. High savings by consumers have also helped, as well as the confusing political debate.
Consumer confidence fell for most of the year, but rebounded this month, possibly because of the stronger growth figure for the June quarter, and no rate rise.
Yesterday the NAB pushed its rate rise forecast back to late 2012 after the revised inflation figures for the June quarter showed a fall.
The NAB said the next rate rise will be around November next year, instead of May, which was the forecast in Tuesday’s monthly business confidence and conditions survey.
But that’s not to say consumers aren’t buying: they are; cars and travel are solid, especially overseas travel.
The country’s biggest automotive retailer is the listed Automotive Holdings, the Perth based company. It had sales of $3.34 billion in the June 30 year. That was a record.
And figures out yesterday from the Australian Bureau of Statistics showed a seasonally adjusted 87,935 vehicles were sold last month, the highest number this year, and indeed the highest since May of 2010.
That’s up 3.3% from July and 4.4% in the year to August.
That is further confirmation that the car retailing sector is doing well, especially compared to the likes of David Jones, Myer and Harvey Norman.
That’s not to say that conventional retailing is finding it tough: it is and cautious, more questioning consumers are the driving force.
And despite the problems, it is still adding jobs: some 17,000 in the year to August (see below).
Flight Centre, the country’s biggest travel operator, lifted the value of travel business it booked in 2010-11 12% to more than $12 billion.
It’s said the 2011 financial year was a record.
Online purchases, both within Australia and offshore, are rising as consumers seek value and are able to shop through comparison sites.
Clearly for products and retail services, consumers are in a buying mood, especially if it involves getting value from the high value of the Australian dollar.
But even though they import much of their product range, Myer and David Jones haven’t exploited the fall in import prices as much as they could have.
Myer management yesterday described the retailing environment as "challenging’ which it is for managements seemingly stuck in a time warp, as Myer and David Jones (and Harvey Norman) seem to be.
According to Myer the outlook isn’t going to improve quickly.
Myer management had this to say about the current year in yesterday’s profit statement and release:
"During 2012, we face a number of additional costs which have been factored into our guidance.
"Increases in store occupancy, depreciation, renegotiated Enterprise Bargaining Agreement (EBA) and penalty rates and loadings initiated by Fair Work award modernisation will total approximately $48 million.
"Assuming trading conditions do not deteriorate further, we anticipate FY2012 sales to be flat and NPAT to be up to 10 percent below FY2011 of $162.7 million.
"Global and domestic economic conditions will dictate when consumer confidence returns to more normal levels.
"Myer is very well positioned to benefit from any improvements in discretionary retail conditions when they occur.
"We have plans to build and strengthen our loyalty program including improved rewards, to relaunch our e-commerce offer and to further increase our digital and social media presence.
"This multi-channel strategy also incl
