Once again the market got it right – shares in department store retailer, Myer (MYR) have fallen 18% from their most recent high of $1.39 on December 23, to $1.13 on Wednesday. In the same time the ASX 200 has edged up just over 2%.
The slide in Myer shares from just before the Christmas break tells us that all those hints and rumours of a weak performance were spot on, despite the higher profit reported yesterday, a reaffirming of the full year guidance and a 50% boost to the interim dividend to 3 cents a share.
It sounded like a wing and a prayer type of assurance from CEO Richard Umbers, who also revealed that the sales performance in January and February had been less than stellar.
Myer lifted net profit for the six months ended January 28 by 5.3% to $62.8 million despite weaker sales (thanks in part to store closures) and falling gross margins.
The result did top market consensus forecasts around $58.7 million.
Earnings before interest and tax edged up 1.5% to $95.2 million – beating forecasts around $89.3 million – after Myer reduced its cost of selling goods and administration expenses, to try and offset nasty a 41 basis point fall in gross margins to 38.3%.
Myer’s total sales for the half dropped 0.6% thanks the to $1.78 billion after the closure of the Wollongong, Orange (NSW) and Brookside (Queensland) stores offset modest same store sales growth of 0.3%.
But investors finally focused on the details in the results, the weakness in January and February and sent the shares down more than 5% to $1.08 at the close.
In fact the figures disguised a worrying trend – after lifting same-store sales by 1.6% in the October quarter, same-store sales fell half a per cent in the January quarter following a slump in consumer demand after Christmas. Analysts had expected second quarter same-store sales to be up 2.8%.
CEO Richard Umbers said sales in January and February were below expectations, with January being the low point. Myer annual end of year its stocktake sale was the “low point.”
He repeated his November guidance saying he expected profits to increase in 2017 – the first growth in seven years – both before and after implementation costs, as long as sales did not deteriorate.
“Myer delivered encouraging sales around the key trading periods of Spring Racing and Christmas, offset by subdued sales during the stocktake sale, resulting in modest comparable store sales growth for the half," Mr Umbers said in a statement to the stock exchange on Thursday morning.
"We are 18 months into our five-year transformation and I am pleased with the progress we have made. We are a better and stronger company as a result of the New Myer strategy.”
But so far as the market is concerned the retailer is back on market watch, negative.
