The stupidity of the Australian investment analyst and many investors knows no bounds – their combined capacity to ignore the blinding obvious and look for the faint or non existent positive when it suits them is legendary – and the latest results of Myer are another example.
By any measure the results were poor and the company is taking another axe to costs, closing three more stores, after shutting three in the year to July.
Earnings were short of guidance, but not short of guidance lowered a couple of months ago, sales growth was non existent and remains that was in the early weeks of 2017-18.
And the 46% slide in the company’s shares so far in 2017 tells us that the results matched the pessimism of investors.
And yet the shares rose 1.4% yesterday to 73 cents because the lower profit that met analyst guidance. They were up nearly 5% in early trading as investors focused on the underlying profit and compared it to guidance, while ignoring the nasties in the detail.
That enthusiasm won’t last long as investors trawl through the figures and discover that Myer is showing distress.
In a masterly understatement, CEO Richard Byers said yesterday that “The financial result isn’t where we want it to be."
Myer revealed that the key measure of comparable sales (or same store) fell 0.2% for the 12 months to the end of July, while total sales, which includes the impact of three store closures, fell 1.4%.
Seeing inflation was 1.9% in the year to June, Myer’s sales went backwards.
And the performance hasn’t improved so far in 2017-18 with sales in the first six weeks of 2017-18 were “below expectations”.
Myer said it expected “continuing changes to both consumer behaviour and the broader competitive environment” in the year ahead – which is code for more weak trading.
Myer said it would close stores in Colonnades in Adelaide, Belconnen in Canberra, and Hornsby in northern Sydney. That’s six in a year and a bit shut.
Net profit fell from $60.6 million in 2016 to $11.9 million – the weakest result since its 2009 float – impacted by write-downs of its investment in the local arm of Topshop which went into administration in May, and its fashion brand sass & bide.
Sass & bide’s performance had been "below expectations", with sales slumping $10.9 million from 2016. Myer confirmed it was writing down the carrying value of the brand by $38.8 million.
Excluding the write-downs and costs associated with its turnaround plan, net profit after tax (NPAT) was $67.9 million, down from $69.3 million and in the middle of guidance given in July of between $66 million and $70 million. The result beat consensus forecasts and investors marked its shares up 4.8 per cent in early trade.
Myer said in May it would beat its 2016 result but two months later that optimism had gone, hit by the costs of the Topshop collapse and the sass & bide problems.
“We are obviously disappointed to have not reached our target of exceeding last year’s NPAT … and that progress against our metrics that matter is slower than we anticipated," Mr Umbers said.
Mr Umbers said its “ New Myer" turnaround plan had helped it "withstand the challenging retail trading conditions characterised by heightened competition, subdued consumer sentiment and discount fatigue".
