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Myer half-year profit tumbles on virus impact

Myer has joined the list of retailers hit hard by the one-two punch of bushfires and coronavirus in the first half of FY20, posting a 26.9 per cent drop in statutory net profit after tax to $24.4 million.

The department store business saw total sales fall 3.8 per cent to $1.6 billion, though comparable sales rose 0.4 per cent excluding the impact of the exits of Apple and Country Road Group. Taking these exits into account comparable sales fell 3.6 per cent. 

Myer chief executive John King said the results were solid considering the macro headwinds hitting the industry at the moment, and shows the customer first plan is the right plan to transform the business moving forward. 

“Management has demonstrated discipline in a tough trading environment and while I am encouraged by the progress I am in no doubt that we still have considerable work to do,” King said.

Myer chief financial officer Nigel Chadwick added that though the first half trades at a positive cash position thanks to events such as Christmas, Black Friday and Boxing Day, the second half of a financial year is typically trades at a net negative.

And while the first half was impacted by bushfires and virus fears, it’s expected the second half could be worse hit.

“The challenging macro environment will continue in the second half, and the ongoing impact of the Coronavirus on store traffic remains uncertain,” King said. 

“The supply chain impact of Coronavirus is currently being managed by our teams in Hong Kong and Shanghai. The teams are focussed on mitigating the impact of delays to the planned delivery of merchandise.”

By the end of the week Myer expects its factories to be back up and running normally, after having been operating at 85 per cent capacity as of last week. 

Additionally, the business faces a four to six week delay in May due to the difficulty in sourcing goods, with King expecting goods shipped to stores to fall to around 40 per cent of normal levels through March.

“It’s a great opportunity to destock and focus on what stock we actually need,” King said. 

According to King footfall had been subdued in CBD and tourism-driven stores over the last few weeks, with the general decline in spending exasperated by a panic around the COVID-19 virus. 

Despite the headwinds largely hitting the business’ shrinking physical stores Myer’s online business grew 25.2 per cent during the period, now representing 10.5 per cent of total sales. 

King stressed that online had become Myer’s ‘biggest store’, and that despite the fact that only half of Myer’s range and half of it’s concessions were represented on the site, online profit was growing faster than online revenue.

In order to further grow this segment Myer will be merging its Myer Marketplace offering into the main website.

The growth in online sales volume wasn’t all good news for the business, however, with the diversity seen in basket types leading expected cost savings in shipping goods to fail to materialise. 

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