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From bad to worse for Myer

Pacific_Werribee_MyerUpdated: 14:15 AEST

Myer has flagged more writedowns after the department store chain’s sales fell by 6.5 per cent during its key Stocktake Sale period in January.

Shares in the troubled retailer fell to a fresh record low of 56.5 cents – down more than 50 per cent in a year – after it said sales for the six months to January fell 3.6 per cent following a poor performance over Christmas and the holidays.

Myer says it now expects net profit to fall to between $37 million and $41 million when it reports its first-half results in March, but that excludes impairments the size of which it is still calculating.

Total sales to the end of November were down 2.3 percent and comparable store sales were down 1.8 percent, compared to the previous corresponding period. Total sales during the first two weeks in December deteriorated and were down 5 percent on the previous corresponding period.

Total sales in the first-half of 2018 were down 3.6 percent to $1,719.6 million, down 3.0 percent on a comparable store sales basis.

Sales online in 1H 2018 were up 48.9 percent, following a 48.4 percent increase in 1H 2017.

“The significant deterioration in trading reflects ongoing challenging retail conditions with widespread industry discounting, a subdued performance of Myer’s Stocktake Sale and a continued shift in consumer behaviour characterised by reduced foot traffic and an increase in online shopping,” said Myer chief executive officer Richard Umbers.

Myer said it “does not anticipate an improvement in retail trading conditions during the second half and, given the recent sales volatility” and it “does not have a reasonable basis to provide a specific profit range for the full year 2018 NPAT at this time.”

“Myer recognises the ongoing, challenging and competitive retail conditions and remains resolutely focused on improving foot traffic and sales across all channels during the second half including the need to remain competitive in key categories where we are facing the most competition,” said Umbers.

“I am in no doubt that our heightened focus areas including online and productivity are correct for this low growth environment as evidenced by the strong growth in online sales in the first-half.”

Myer chairman Garry Hounsell recognised that the retailer’s shareholders will be “disappointed” with the announcement.

“I am continuing my chairman’s review of all aspects of the business including Myer one [loyalty program], omnichannel, merchandise, marketing, customer service, property and a thorough cost review.

“The focus on costs is ongoing and was evidenced by the announcement on 18 January in which we announced a number of redundancies and the exit of a further floor at the Support Office, which will deliver annualised cost savings of over $7 million. I will provide further updates when appropriate.”

In January, Myer announced further consolidation across the retailer’s supporting operations – with 50 jobs cut from Myer’s support office as the retailer exits a further floor to bring the total vacated area to 4.5 floors or over 40 per cent of the space since September 2015.

Premier responds

Earlier this week, Myer’s largest shareholder, Premier Investments, requested a copy of the department retailer’s shareholder register to ‘facilitate the reconstitution of the incumbent, failed board’.

In the latest stage of the ongoing war between Myer and its largest shareholder, is looking to “facilitate engagement” on an EGM where a vote to reconstitute the company’s board can be taken.

Following Myer’s latest update, Premier said “shareholders must unite to save the company”.

“Today’s numbers show that the disastrous sales and profit decline within Myer is accelerating,” Premier said in a statement.

“Myer is now in peril and shareholders must urgently unite to save the company and what is left of our investments. Premier will caucus with other significant shareholders in order to reconstitute the entire Myer board. Following shareholder discussion, a board comprised of a majority of independent directors would be put to a proposed EGM of all shareholders.”

Speaking to Inside Retail, Hianyang Chan, senior research analyst at Euromonitor International said despite efforts by the Myer board to make a leaner and more efficient retailer plus challenging trading conditions for department stores – characterised by intense competition from digital channels making inroads into market share and subdued consumer sentiments – meant that total sales for the embattled retailer remained below expectations.

“As foot traffic continues to fall at bricks and mortar stores as shoppers are increasingly opting to buy online, the company’s decision to ditch their VIP season showing in favour of smaller events in select stores around the country that is targeted at specific consumer groups shows a willingness by Myer to experiment in different ideas in a bid to drive traffic back to their stores and hopefully reinvigorate sales,” he said.

“Department stores must continue to put in place new and innovative strategies to give Australians reasons to visit their stores.”

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