Myer chief executive Richard Umbers has blamed everything from the Australian dollar to patchy consumer confidence, aggressive competition and a soft stocktake sale for a slide in the department store's first-half sales.
The department store chain's sales slumped by 0.6 per cent to $1.78 billion in the 26 weeks to January 28, and second-quarter sales - which captured the important post-Christmas clearance sale - fell by 1.3 per cent in total, or 0.5 per cent on a comparable store basis. The result defied expectations that shoppers had returned to the stores for the January sales.
![Myer sales disappointed after its important stocktake sale fell short of expectations.](/web/20170415173618im_/http://www.brisbanetimes.com.au/content/dam/images/g/p/w/c/u/h/image.related.articleLeadwide.620x349.guz171.png/1491104995596.jpg)
Despite this, Myer's net profit increased by 5.3 per cent to $62.8 million, significantly higher than analyst consensus estimates of $58.7 million, and the business confirmed it still anticipates a higher full-year net profit as long as the weak conditions do not continue.
Myer admitted sales in January and February were below expectations, identifying January and its stocktake sale as the "low point."
![Myer chief executive Richard Umbers.](/web/20170415173618im_/http://www.brisbanetimes.com.au/content/dam/images/g/u/o/8/8/j/image.related.articleLeadNarrow.300x0.guz171.png/1489619349140.jpg)
"Based on the expectations that those conditions do not return", Myer said it still anticipates earnings before interest and tax, depreciation and amortisation to grow faster than sales this financial year, resulting in increased net profit .
Its operating gross profit margin, an important measure of profitability, fell by 41 basis points to 38.3 per cent, partly due to the half-on-half deterioration in the Australian dollar, according to Myer.
"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."
Analysts expected rising sales
Deutsche Bank analyst Michael Simotas had expected second-quarter total sales growth of 2.3 per cent or 2.8 per cent on a like-for-like basis, which would have been a pick-up from the 1.6 per cent comparable sales growth in the first quarter, as he noted Myer was cycling easy comparative growth rates for this period.
Credit Suisse predicted Myer's second-quarter like-for-like sales growth would have accelerated thanks to a "broad-based improvement under the New Myer strategy despite the lack of industry growth."
Sales momentum at arch rival David Jones collapsed in the first half, sagging to 4 per cent compared to 11.2 per cent growth in the previous corresponding period.
David Jones' like-for-like sales improved by just 0.5 per cent for the 26 weeks to December 25, however its total sales growth was still well ahead of the industry's 2.8 per cent decline, as reported by the Australian Bureau of Statistics.
Target's decision to scrap its annual toy sale and the weak performance of Big W didn't lift Myer's sale numbers, and it appears the soft spending that triggered the recent collapse of high-profile apparel brands such as Marcs and Herringbone is weighing on the department store chain's sales as well.
Mr Umbers said Myer remained focused on reducing its store footprint and cuts its total retail real estate by 20 per cent, including a recent decision "to hand back more than a third of the space at 800 Collins Street."
"We continue to make good progress in developing a simplified business model, this is demonstrated by the rollout to stores of a workforce management system, more simplified administration processes for store back office and the appointment of external providers to manage our customer support centre and digital services," Mr Umbers said.
"This result also demonstrates the strength of Myer's balance sheet and operating cash flows which support our ongoing investment in the strategy while at the same time generating returns to shareholders," he said.
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