Myer Holdings Ltd (ASX: MYR) shares bounced 8% higher this morning following the release of its full-year results. Is the iconic Australian retailer finally turning the corner?
About Myer
Myer Holdings is the name behind the popular department store retailer. Myer is named after Sidney Myer who arrived in Australia from Russia in 1899. Myer is an upmarket department store business. Sidney Myer and his brother Elcon opened the first Myer store in Bendigo in 1900, and opened a second Bendigo store in 1908.
In 1911 Sidney Myer bought adjoining properties on Melbourne’s Bourke Street and opened the Myer Emporium. Today, Myer has tens of thousands of shareholders and offers retail products from over 1,000 suppliers through its nationwide ‘big box’ department stores.
What Did The Myer Report Say?
Myer announced a full-year statutory net profit after tax (NPAT) of $24.5 million. This is a far cry from last year’s $486 million loss following a significant writedown of goodwill. A better guide to the performance of the business might be underlying net profit which was up 2.2% to $33.2 million.
This Rask Finance video explains the difference between underlying and statutory results:
Despite the slight uplift in underlying profit, Myer’s total sales actually retracted by 3.5% to $2.99 billion. Comparable store sales were down 1.3% excluding Apple products which the business exited in May 2019. Comparable store sales, sometimes referred to as like-for-like sales, is an important performance indicator for retail companies as it gives a strong lead as to the underlying strength of the business’ operations.
Online sales continued to grow rapidly, up more than 25% to $262.3 million. Digital sales were up 21.9% to $292.1 million representing 9.8% of total sales.
Pleasingly the company reported a 0.65% increase in its gross profit margin to 38.85%. It also managed to reduce net debt by $69 million throughout FY19.
Management Comments
Commenting on the result Myer CEO John King said, “This result demonstrates our focus on profitable sales, a disciplined management of costs and cash, as well as deleveraging the business.”
“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.”
Regarding the future outlook for the company Mr King added, “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 cost savings and efficiencies, across our supply chain as well as other non-customer facing activities.”
Is Now A Good Time To Buy Myer Shares?
Today’s result was a step in the right direction but I think the future will be very challenging for Myer. With economic growth slowing, retail companies like Myer will face a difficult task growing profits as cash-strapped consumers have less disposable income to spend at stores.
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At the time of publishing, Luke has no financial interest in any companies mentioned.