As expected, Myer (MYR) shares fell sharply yesterday after it reported awful interim results, confirming why the board replaced long time CEO Bernie Brookes with Richard Umbers earlier this month.
And the retailer slashed its expected second half performance with earnings now more than 20% lower than the final half of the 2013-14 financial year.
As a result Myer shares fell more than 10% to $1.375, after touching a low of $1.335. They had fallen 13% at the opening, but later recovered some of those losses.
MYR 1Y – No profit growth at Myer
The interim dividend was chopped to 7c a share from 9c previously.
That was after the final was cut last year to 5.5c a share from 8c.
Myer lifted sales 1.5% to more than $1.76 billion, a rise of just $1 million a week or $26 million in the half year. Same store sales growth was 0.6% for the half year and aroundf 1% in the second quarter.
But profits went south at a rate of knots – earnings after tax fell 23.1% to just over $62 million and there was no good news – the stumbling department store just didn’t sell enough goods quickly enough.
Myer also cut second half profit forecasts as well because of higher costs, especially $7 million for the previously revealed strategic review, and $15 million of other cost increases.
Second half profit will be as low as $75 million, or more than 22% down on the $98 million reported last year.
Recent sales have been ahead of last year but below expectations and the company now anticipates operating gross profit margin pressure to continue during the second half, it said.
"We anticipate total costs to grow by approximately $15 million in the second half compared to the second half of 2014.
"One-off costs in second half relating to the strategic review are expected to be approximately $7 million.
“The company now expects 2015 net profit after tax to be between $75 and 80 million (excluding one-off costs),” Myer said.
The results are the first for the new CEO Richard Umbers, who replaced long-serving boss Bernie Brookes at the start of this month.
Speaking to reporters after the result, Mr Umbers said decisions on store closures and any capital raising would hinge on the ongoing strategic review.
But he did say store closures could be on the cards once the review was complete, and promised courageous action to try and revive the moribund retail giant.
Myer shares listed at $4.10 back in 2009 and have yet to get anywhere near that.
Meanwhile, there was also glum news from the other end of the retailing spectrum, OrotonGroup (ORL), our only claim to fame among upmarket retailers, which saw its earnings slide, and lowered its dividend.
Sales rose 6% to $66.8 million, but like for like sales sank 6% because the company has reduced the amount of discounting of the Oroton brand.
Net profit fell to $2.2 million from $5.1 million and dividend was cut to 4.5c from 8c a share.
Oroton’s underlying earnings before interest and tax slumped 40% in the latest half year to $4.8 million, dragged down by losses at Oroton’s new Brooks Brothers stores and weaker-than-expected sales of Oroton handbags.
The result was in line with Oroton’s January guidance, when chief executive Mark Newman warned underlying earnings were expected to fall by between $2.5 million and $3.5 million to between $4.5 million and $5.5 million.
ORL 1Y – Oroton profit slips as discounting ends
Cutting back on the discounting of Oroton’s bags and other products saw the group lose market share in accessories. Oroton also incurred higher-than-expected costs opening the first of as many as 35 Brooks Brothers traditional business attire stores.
While the result was on par with the January forecast from the company, it was much weaker than (too optimistic?) market expectations.
Analysts had forecast underlying EBIT of $8.9 million and a $6.2 million first-half net profit on sales of $66.45 million. Those were well short of what was reported by the company.
Oroton shares fell 9.9% to $2.44.
