This article is from the Australian Property Journal archive
MYER’S woes worsened during the important January stocktake sale period with poor sales prompting a warning that its interim profit could be slashed by up to $41 million.
The revelation from the struggling department major will add further urgency to the board challenge thrown down by its largest shareholder Solomon Lew earlier this week via his Premier Investments group, which made a move to set up extraordinary general meeting.
Myer’s stocktake sale period sales were down 6.5% on the previous corresponding period. It followed a 2.3% drop in total sales through November, with comparable store sales down 1.8%, before Myer shocked the market by announcing sales for the first two weeks of December were down 5%.
It said in a market update that first half NPAT would drop by between $37 million and $41 million, but stopped short of providing a guidance for the full year, saying it did not anticipate an improvement in retail trading conditions during the second half and, “given the recent sales volatility, (it) does not have a reasonable basis to provide a specific profit range for the full year 2018 NPAT at this time.”
Total sales in the first half of 2018 was $1.7196 billion, down 3.0% on a comparable store sales basis. Online sales were up 48.9%, a 48.4% jump on the pcp.
Its 2017 full-year results suffered following the write-off of its 20% stake of $6.8 million in collapsed fashion retailer Topshop’s local operator Austradia, and a $38.8 million hit from the weak performance of its sass & bide label.
Myer CEO Richard Umbers said the significant deterioration in trading reflected ongoing challenging retail conditions with widespread industry discounting, a subdued performance of the stocktake sale and a continued shift in consumer behaviour characterised by reduced foot traffic and an increase in online shopping.
Myer signalled it was failing to keep pace the evolving retail market late last year when it announced it had changed its sales targets and metrics that were introduced with the introduction of the “New Myer” program in 2015, and confirmed it would be shuttering 19 stores.
It said it is currently undertaking an impairment assessment of the carrying values of assets on the balance sheet.
“Impairment indicators are in place, including the recent trading results, and we anticipate that there will be a non-cash impairment charge to be taken at the first half 2018 result.”
The department store came under pressure to write down its circa $1 billion in intangibles on its balance sheet after South Africa giant Woolworths Holdings recently wrote down its $2.1 billion investment in David Jones by $712 million, which included goodwill and brands.
“Myer recognises the ongoing, challenging and competitive retail conditions and remains resolutely focused on improving foot traffic and sales across all channels during the second half including the need to remain competitive in key categories where we are facing the most competition,” Umbers said.
“I am in no doubt that our heightened focus areas including online and productivity are correct for this low growth environment as evidenced by the strong growth in online sales in the first half.”
Chairman Garry Hounsell said, “I recognise that shareholders will be disappointed with today’s announcement. I am continuing my chairman’s review of all aspects of the business including Myer one, omni-channel, merchandise, marketing, customer service, property and a thorough cost review.”
As part of cost-cutting measures Myer cut another 50 jobs at its Melbourne headquarters at 800 Collins Street last month, reducing its office footprint by more than 40% and vacating around four-and-a-half floors within the 10-storey, 30,000 sqm building.
Earlier this week, the vocally critical Lew said in statement, “It is not in the best interests of shareholders that the current Myer board be allowed to preside over another year of declining sales, eroding profits and further share price deterioration before urgently needed change is introduced at board level.”
Premier Investments, which own Just Group, Peter Alexander and Smiggle, has a 10.8% share in Myer, and has requested Myer’s shareholder register for an EGM to reconstitute the board.
Australian Property Journal
