Myer Struggles To Find A Real Growth Strategy

At first, investors treated department store chain Myer with kid gloves yesterday after another splodge of red ink all over its 2019-20 interim accounts.

The retailer reported a 37% slide in first-half profit, thanks to more restructuring costs, redundancies and the loss of two major branded product lines in Apple products and Country Road Group.

Net profit was $24.4 million for the 26 weeks to January 25, a significant slide from the $38.4 million in the first half of 2018-19.

The shares only eased back 0.2% to 34 cents at first, but after more consideration, it was thumbs down as the shares slid 4.3% to 33 cents.

That was also a generous reaction given the company also warned the tough times will continue as the coronavirus outbreak exacerbates the pain of the soft Australian consumer spending, especially in the department store sector.

Naturally, with the latest loss and more to come, there’s again no dividend to encourage shareholders.

Sales dropped 3.8% to $1.6 billion.

CEO 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 threatens to keep people from heading out.

Online sales grew by 25.2% to $168.2 million during the half, but that was not enough to offset the slide in-store sales.

Comparable store sales grew by 0.4% when excluding Apple and Country Road Group sales. Apple products were taken off Myer’s shelves last May, while Country Road left Myer late last year.

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 still aiming to cut another 73,000 square metres of store floor space in the 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% to an unconvincing $41.5 million.

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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