Australia’s other department store operator Myer Group has reported 2.3% rise in first half net profit, after a fall in sales as consumers tightened their belts.
The group says it expects more of the same this half, with sales down around 2.5% in the first few weeks of the current half.
Myer is owned by private equity group, TPG, the Myer family and management.
The retailer said net profit for the six months to January 24 was $79.84 million, up from $78.02 million in the first half of fiscal 2008.
Group sales revenue was $1.54 billion, down from $1.63 billion, excluding GST charges and revenue deferred under customer loyalty programs.
Goods sales totalled $1.76 billion, down 3.7%, as previously announced in the sales statement last month.
First half earnings before interest and tax (EBIT) rose 6.3% to $161.30 million, from $151.76 million.
Myer said in its profit statement that "The half of saw sales budgeted to fall 5%, but ultimately fell 3.7%.
“The outlook for the balance of FY09 is not dissimilar to the first half and we are planning for a slight further deterioration in sales to be down 5%. To date in H2 FY09, sales have been down around 2½ %.
"We confirm previous guidance, anticipating that FY09 profits are likely to be similar to FY08, demonstrating the relative resilience of Myer’s business model to the current challenging market conditions.
"We remain on track to deliver full year EBIT of 7 cents in the dollar at the end of the Turnaround Phase in July 2010 (up from 1.8 cents at acquisition), as previously advised," the company said yesterday.
"The half-year was characterised by weak consumer sentiment and a downward spiral in equity markets.
“Lower interest rates on mortgages, some relief in petrol prices and the December stimulus package, did not alleviate the decline in consumer spending patterns, particularly in the discretionary areas.
"Cosmetics, womenswear and accessories were strong, benefiting from our large and growing range of Australian and international brands and designers.
“Homeware and furniture categories did not perform as well, reflecting a consumer willing to delay larger discretionary and luxury purchases.
"As consumer sentiment deteriorated, Myer’s strategy was to increase targeted promotional sales, improve store appearance and shift advertising to price points, which was rewarded with an improved second quarter.
“Sales declined 3.7% to $1.762 billion in the first half-year, with a drop of 4.8% in quarter one and 2.8% in quarter two as our strategy encouraged Christmas and Stocktake sales spending, aided to a degree by the Government stimulus.
"The business also benefited from an improved in-stock position and better in-store execution.
"Like-for-like sales declined 3.7%, after taking into consideration four new stores and the refurbishment of our Geelong, Doncaster and flagship stores in Melbourne and Sydney.
"Sales in Queensland, Western Australia and New South Wales were resilient with Victoria being much tougher. Specific stores in lower socio economic catchments continue to underperform the average."
Capital expenditure was up 38% to $57 million in the first half. Net debt was steady on $652 million and Myer had $244 million in cash as at January 24.
"Net debt increased slightly to $652 million from $643 million in January 2008, following a significant reduction from $979 million at acquisition. All banking covenants are comfortably met and no debt repayments are due for 3 ½ years.
“We have $224 million cash on deposit and a $250 million committed revolving credit line was unused at the half-year end.
"Given the strong cash position, $250 million in unused working capital facilities and comfortable debt covenants, we see no reason at this stage to slow down our capital expenditure program.
“However, we do have flexibility built into our plans should we decide to make adjustments in the future.
"We remain committed to our store expansion program, which will see the Myer chain of stores grow from 60 stores at acquisition to 80.
“We currently have 65 stores and construction of our new store at Top Ryde in NSW has commenced.
“This follows the opening of four new stores in 2008, which are trading in line with expectations. During FY08 we signed nine leases for new stores.
"We are experiencing several landlord delays and others could arise as a result of issues facing the property sector. As such we have built flexibility into our planning.
"We continue to make good progress in our refurbishment program, with our Geelong, Doncaster and Sydney store refurbishments completed during the period.
“This program reflects our long-term focus and aims to reinforce the Myer brand proposition, while at the same time supporting future sales growth.
"The refurbishment of our Myer Sydney store to international class standard was completed in time for Christmas.
“The major rebuild of Myer Melbourne is progressing with phased delivery of the store due to commence and work has recently begun on the refurbishment of our stores in Castle Hill and Blacktown."
