Myer’s (MYR) shares weakened yesterday after the company surprised with a weak third quarter trading update.
The shares fell 3% to 98 cents to take the fall this week to more than 13% and over 17% for the month so far.
Monday’s fall of nearly 10% followed a gloomy report from a broking analyst about the impact of the arrival of Amazon on Myer’s business and future.
Yesterday’s weaker than expected sales report compounded the pessimism about the outlook for the department store group.
Myer blamed the challenging retail environment, Cyclone Debbie in late March and having fewer discounts for cutting sales last quarter, as revenue fell more than $20 million.
Total sales in the three months to March 31 were down 3.3% to $653 million, Myer told the ASX.
Sales were down 2% without the impact of store closures, it said. The sales slump means year-to-date topline sales are down 1.3% on the same period last year at $2.45 billion, and 0.3% down on a same store basis (which means they have gone backwards).
Myer chief executive Richard Umbers said in the statement to the market the poor showing in the March quarter would not stop the department store from hitting its full year guidance, as the company had said in March.
"We have remained strongly focused on driving productivity, lifting efficiency and deducting our historic dependency on discounting, all of which have impacted the result," Mr Umbers said.
"While sales growth is integral to the New Myer journey, at this time we are focused on higher quality sales to maximise profitability." He also said long-term benefits of a more productive network would outweigh the short-term sales impact from store closures at Brookside, in Brisbane, and Orange, in NSW.
Myer has maintained its guidance that full-year earnings growth will exceed sales growth provided weak trade experienced in the January stocktake period does not continue.
In the first half, Myer’s sales were flat after the January stocktake sale period offset an improved performance during the Spring racing carnival and Christmas.
Fashion brand sass & bide, which Myer bought in 2011, continues to be a particular weak point with another bout of weak trading accounting for $1.5 million of Myer’s third-quarter sales drop
Myer said its online sales grew 36% in the year to date and sales per square metre had improved 5.1% since mid-2015, Myer said yesterday.
Monday’s research note from Credit Suisse analyst Grant Saligari predicting the arrival of TK Maxx and Amazon in Australia would “be all too much for Myer” helped trigger the sharp sell off in the shares on Monday. One of his interesting points was the length of time Myer takes to deliver an online purchase. He claimed it was up to five days, while Amazon has a policy of overnight fulfilment in its existing markets.
