A thumbs down from the market for Myer Holdings’ first interim profit as a listed company for near 25 years.
The company reported higher earnings (removing the distortions of the costs of the sale and float by private equity late last year) but then it warned sales could be flat in the next six months as shoppers no longer have government cash handouts to spend.
But Myer maintained its earnings forecast for the full year.
Perhaps it was the 38% rise in underlying profit, or the 11.9% rise in Earnings Before Interest and Tax (EBIT) that allowed it to remain confident.
But after sending the shares 6c higher to $3.51, down they went as investors crunched the numbers, savoured the outlook and said ‘no’.
The shares ended at $3.44, down 3c on the day and a long way from the float price (and the year’s high of $3.98, but well up on its low of $3.12).
Clearly a lot of people remain unconvinced that Myer has changed its spots, after spending three years being buffed and polished by the private equity sharks.
It seems it was the gloomy outlook that took investors and analysts by surprise.
With rival department store group, David Jones due to report its interim profit next week, the contrast will be quite telling.
David Jones management was upbeat when revealing its first half sales figures last month and lifted its profit guidance.
David Jones places a lot of store in the retailing forecasts of Access Economics, so it was interesting to see that firm this week upgrading its outlook for retailers.
Access said it saw Australian retail sales growth accelerating over the next couple of years.
It saw retail sales growth, adjusted for inflation, rising from 2.6% in the 12 months to June 30 to 2.7% in the 2011 year and 3.8% in 2011-12.
And yet Myer was gloomy.
"The consumer remains wary," Myer chief executive Mr Bernie Brookes said in a statement.
And, reflecting this Myer, which listed last November, cut its full-year sales growth forecast.
"We remain cautious about the outlook for the second half of FY10. We are entering a period during which we cycle the second and more significant Federal Government Stimulus package, further interest rate rises are widely anticipated, and the consumer remains wary," Mr Brooks said in the statement.
"Against this backdrop, and despite the sales trend for the first six weeks of the second half 2010 being ahead of the 2% growth reported in the first half 2010, we anticipate total sales growth in the second half of the year to be in the range of 0 to 2% and the full year to be up 1 to 2%."
However, the group said it remained confident of achieving its forecast for 11% growth in 2011 earnings before interest and tax to $261 million.
Including the one-off costs of floating the company, Myer’s first-half net profit fell 74.4% to $21.3 million for the 26 weeks to January 23, from $83.2 million in the prior corresponding period.
The company will pay an interim dividend of 10.5 cents a share.
Revenue rose 2% to $1.8 billion. Earnings before interest and tax (EBIT) were up 11.9% to $181 million, in line with the company’s guidance.
Mr Brookes seemed happy though with what had happened in the first half.
He said in the statement "On behalf of the Myer team, I am pleased to report the 7th successive half year of strong profit growth since the acquisition of Myer from Coles Myer Ltd.
"The 38% increase in net profit after tax is well in advance of the prospectus guidance and, together with our strengthened balance sheet, has led to a dividend being declared, which is at the top of the prospectus range.
"These 44 months of profit growth have occurred at the same time as the business being re-engineered during the turnaround phase.
"We are looking forward to the commencement of our store opening program and the launch of our new International standard flagship store in Melbourne.”
Footnote: A big contrast to the Myer result and lack of optimism was to be found in the interim figures from Orotongroup, the country’s only wholly upmarket luxury goods retailer, which reported yesterday.
It revealed a net profit of $15.4 million for the six months to January 23, up 24% on the previous corresponding period.
Group revenue rose a more sedate 9.8% to $81.6 million as same store sales grew 6.3%. It was the company’s best sales performance in more than five years.
Dividend was boosted a healthy 37.5% to 22 cents a share.
Someone got it right.
