Myer eyes return to profit growth as full-year earnings meet guidance

Myer’s underlying earnings have fallen shy of expectations, but it is eyeing a return to growth in the coming year.

Shoppers pass the entrance to the Bourke Street Mall, Myer department store in Melbourne. (Carla Gottgens/Bloomberg News)

Department store operator Myer has delivered full-year earnings in line with guidance but just short of market expectations.

For the 53 weeks to July 30, Myer (MYR) reported a 10.6 per cent decline in underlying earnings to $69.3 million, meeting the $66m to $72m guidance put forward by the company.

The numbers were shy of market expectations for underlying net profit after tax of $70m.

In the first full year of the New Myer strategy, the department store operator booked a 2.9 per cent lift in sales to $3.29 billion as it was aided by an extra week in its fiscal year.

Myer’s comparable sales growth hit 3 per cent for the year, but slowed to just 1.8 per cent in the final quarter as it warned on a “more challenging environment”.

The number compares unfavourably to Citi forecasts of 2.6 per cent and to David Jones’ like-for-like sales growth of 3.1 per cent in the fourth quarter, with its primary rival also delivering comparable sales up 7 per cent on the year.

It does, however, represent a sharp improvement on like-for-like sales growth of 1.1 per cent and 1.2 per cent across the last two years.

The retailer’s net profit after tax after including significant items doubled to $60.5m, due to post-tax implementation costs associated with the New Myer strategy falling from $47.7m to $8.8m.

The costs associated with the new plan came in below estimates put forward by Citi analysts.

“After 12 months in our five year New Myer journey we have made pleasing progress on our transformation and at the same time delivered a net profit result in line with guidance,” Myer chief executive Richard Umbers said.

“New Myer has won the strong support of our customers, our team, our suppliers and other stakeholders.

“We still have a long way to go but we are moving in the right direction.”

Mr Umbers said the group’s brand shake-up would continue through fiscal 2017, with several well-known names to either receive more shelf space or be added to its floors.

“During 2017 we will build on our wanted brands focus with the continued roll out of a number of brands including Topshop Topman, Industrie, Mimco, and the introduction of SABA, Oroton and John Lewis homewares,” he said.

The retailer shied away from offering specific guidance but said it expects pre-tax earnings before depreciation and amortisation to outpace sales growth in the year ahead, while underlying earnings are predicted to return to growth for the first time in five years.

In its first full year on the local bourse in fiscal 2011, Myer logged underlying profit of $163.2m, with today’s number of $69.3m revealing just how far the group has fallen since rejoining the local sharemarket in October 2009.

Since 2011, yearly dividends have dropped every year, from 22.5c a share to just 5c this year, while its share price has slumped from an October 2009 IPO price of $4.10 to just $1.30 ahead of today’s results.

Myer declared a fully franked final dividend of 3c a share, double the 1.5c prediction from UBS analysts.