Myer Net Profit Tumbles

Written by Oonagh Reidy     20/03/2014 | 11:43 | Category: HOME OFFICE

Myer net profit slumps, as it looks to merge with David Jones.

Myer Net Profit TumblesMyer half year (H1) FY2014 results, released today, showed sales grew just 0.3 percent to $1,7 billion, although rose 1.2 percent on a comparable store basis. 

Net profit after tax (NPAT) was down 8.1% to $81 million for the half year to January 25. Second quarter sales rose just 0.2 percent to $1,046 million.  

David Jones yesterday, reported half year total sales rose 3.8% to $1,042 million although its profits also fell.Myer's earnings (EBITDA) also slumped 7.1% to $172 million. 

The retailer's shares slumped 4.51% today to $2.54 after the poor result was announced. Operating gross profit margin declined by 21 basis points to 41 percent, while operating gross profit also fell slightly. 

Myer cosmetics department came in as the top performer in the half year despite the deflationary impact of ongoing price harmonisation. Other categories that performed well were Youth, Fashion Accessories, Women's apparel and Footwear. 

Myer Exclusive Brands accounted for 20% of total sales. 

The positive comparable store sales growth achieved in Q1, up 0.3%, continued into Q2, and Myer has delivered comparable store sales growth in six of the last seven quarters, noted CEO Bernie Brookes. 

"The second quarter was characterised by weak trading during November and the first half of December but with significant  improvement immediately prior to Christmas and a very strong Stocktake Sale."

Myer online sales continued to grow strongly during H1 with 18.5 million visits to the website. 

Online sales continued to grow strongly supported by improved fulfilment capability as a result of the online distribution centre which opened prior to Christmas.  Expansion of the online range has been a priority, with SKUs increasing to more than 100,000.  

The retailer was "disappointed" by the website outage at the start of its Stocktake Sale, but insists the webstore continues to trade well.  

The best performing states were Western Australia, New South Wales and the Australian Capital Territory, overall.  

Cost of doing business increased by 2.1% to $540 million relating primarily to higher labour and occupancy, investment in new stores, refurbishment and online business expenses. 

Brookes also said good progress had once again been made executing Myer's five-point plan. 

Of the David Jones merger, which Myer first proposed late last year, it "represents a unique opportunity to create significant value for both companies' respective shareholders," the retailer said today. 

"Significant analysis was undertaken over an extended period leading to the approach. The confidential, non-binding, indicative proposal was subject to amongst other things, regulatory approvals, due diligence and the unanimous recommendation of the David Jones Board in support of the transaction." 

Myer also welcomes David Jones' appointment of a strategic adviser, announced this week, to assess the proposal and potential synergies it would deliver.