The dichotomy in the Australian retailing scene was again on display at the annual meetings of Myer (MYR) in Melbourne and Kathmandu (KMD) in NZ yesterday.
Myer was cautious, more hoping to see growth. Kathmandu said it was seeing solid growth and expects to see more in the coming few months, even though it is also wary of the health of the economy.
Kathmandu though is busy in a solid market and economy in NZ – compared with the more sluggish Australian retail market and economy.
It is also a small entrant in the UK economy which is also showing signs of life.
But Myer is stuck in the slow moving Australian market, battling the likes of David Jones at the top of the retail tree, and fighting off the better performers like Kmart (and to a lesser extent Big W at Woolies) and niche players like Kathmandu.
Being a smaller niche player like Kathmandu has its advantages in that it does allow for greater freedom and a more nimble approach to retailing, but the same cost/ margin/ profit and loss rules apply to it in the end as they apply to the likes of Myer.
So at yesterday’s AGM, Myer chairman Paul McClintock expressed some confidence in saying that there had been some signs of an improvement in consumer sentiment post the September 7 poll, which there has been, but not as much as some businesses would have wanted to see.
But he warned that the retailer remained cautious about the year ahead given the continued economic challenges, as well as the disruptive impact of major refurbishments and higher costs from store closures that will hit the company in fiscal 2014.
Trading improved "modestly" during the quarter but remains "patchy" for the permanently cautious Myer.
(Myer has already warned that earnings this year will be down on 2012-13 because of those higher investment costs and higher depreciation charges, plus the costs of disruption at some stores.)
Mr McClintock said the benefits to Myer of those store revamps would be seen in 2015 when an uplift in the retailer’s performance is expected (if only because capex charges will be lower, though depreciation charges will still be high).
The chairman also told the meeting that Myer was progressing with its succession plans for current Myer boss Bernie Brookes, who is due to step down in August 2014.
He said shareholders would be updated at Myer’s half year results in March as to the progress in finding the replacement for Mr Brookes.
Mr Brookes told shareholders that the company’s first quarter sales results which showed an 0.44% (as reported last week) rise in total sales was pleasing.
He said trading had improved "modestly" during the quarter but remained "patchy", but added that Myer was well positioned for the Christmas and stocktake trading period.
Mr Brookes said that like the chairman, he had a cautious outlook for fiscal 2014.
He said it would be a year of two different halves with sales benefited by two major store refurbishments, key category growth, new brands and online sales but sales also impacted by store closures related to the refurbishment of three of its top 20 stores. Mr Brookes said he expected profit margin expansion at a similar rate recorded in 2013.(when it rose 40 points to 41.7%).
The cost of doing business would increase by 4% to 5% including $11 million in one-off costs. That was suggested earlier in the year by the company.
Myer shares ended steady at to $2.84, which wasn’t a bad effort in yesterday’s sell-off in the wider market.
For Kathmandu no such joy as the shares fell nearly 3% to $3.31, despite the solid first quarter update at the company’s annual meeting in Auckland.
KMD vs MYR YTD – A tale of two retailers – cautious Myer, confident Kathmandu
The company told the meeting that group sales for the 16 weeks to November 17 were up 0.9% to $NZ70.9 million ($63.50 million), on an actual exchange rate, but up a very sold 3.8% on a same-store sales basis (and constant currency basis).
And Kathmandu indicated that the sales growth was coming from Australia and New Zealand where same store sales were both up more than 3%. (Same store sales are the best measure of retailing performance.)
"Despite difficult retail trading conditions, our sales performance in the first 16 weeks of the financial year was approximately in line with expectations," chief executive Peter Halkett told the meeting.
"Consistent with our normal trading pattern, sales to date are less than 20 per cent of our expected total sales for the year."
"Our first half-year profit result remains highly dependent on the Christmas and January trading period."
Kathmandu has opened two new stores in Australia in Melbourne and Adelaide, and one in Auckland.
The company expects to have another two, one in Melbourne and another in Brisbane, open and trading before Christmas.
Two more will be opened early in 2014. Another 15 new stores are still in the pipeline.
