A big day for struggling department store chain, Myer with the shares seeing their best day for months, jumping more than 10% at one stage after its 2018-19 results showed it had seemingly steadied a sinking ship.
But before we go overboard and declare that Myer is back from the dead, the closing share price of nearly 63 cents takes us back to early June, so yesterday’s rebound could actually be like the surge back then – a one-off jump that gradually dies as the grim reality of the current state of health of retailing returns.
The shares closed at 62.7 cents, up 10%. At that level, the paper loss for major shareholder, Solomon Lew’s Premier Investments is a little smaller seeing he bought in around $1.14 a share.
The driver for yesterday’s enthusiasm was a 2018-19 result that better than many had forecast (and nowhere as rotten as the report and write-downs from rival David Jones. Myer took its write-downs in 2017-18).
Net profit after tax increasing by 2.2%, partially due to higher online sales but mostly closure of underperforming stores and product lines and a concentration on improving profit margins wherever it could.
Myer’s underlying net profit rose to $33.2 million, That was on a fall in revenues for the year to July to $2.99 billion.
Earnings before interest, tax, depreciation, and amortisation (EBITDA) rose 7.2% to $160.1 million. This, plus the sales figure and the net profit were slightly better than market estimates, hence the sharp rise in the shares yesterday.
Comparable store sales fell 1.3% lower than the 1.9% slip estimated by analysts – the fall was due to closing stories and floor space.
Myer chief executive John King described the result as “disciplined”, with the company reducing costs by $32.6 million over the year through reduced store occupancies and a new in-store staffing model.
But he said there was more to be done, and pointed to a challenging consumer environment in the coming year.
“In the first year of the Customer First Plan, we have progressed a number of strategic initiatives, but recognise there is much more to be done to transform this business in the interests of customers and shareholders,” Mr. King said.
“We anticipate the challenging macro environment and subdued consumer sentiment to continue during FY2020. However, we have identified a number of opportunities to improve productivity and to continue to reduce costs, through both cost savings and efficiencies, across our supply chain as well as other non-customer-facing activities.”
He said that since July 2018, Myer has either closed or announced the closure of 29,000 square metres in store Gross Lettable Area (GLA) “ ith a further 5-10% of our store GLA under active discussion.
“Significant opportunities remain across our network for space hand backs or closures and these discussions will continue with landlords.”
“Pleasingly customer service metrics have improved during the year reflecting back-office efficiencies, the new labour model that ensured more appropriate service levels at peak trading times, greater training levels and improved product knowledge,’ he said.
Online was standout for Myer in the year – digital sales jumped just on 22% to $292.1 million in the year, nearly 10% of total sales for the year and a sign the company is getting something right.
