Myer sinks to $476.2m half-year net loss after impairments blow

Myer’s boss has criticised failures under a former CEO as $500m in impairments contributed to its biggest loss in over a century.

Steep falls in Myer’s share price, in part due to several profit forecast downgrades, led to the stock being removed the top 200 public companies on the ASX earlier this month. Pic: AAP

The nation’s biggest department store, Myer, has unveiled its biggest loss in more than a century of trading, reporting a half-year loss of $476.22 million as more than half a billion dollars in restructuring costs and impairments of its goodwill sank the retailer deep into the red.

Myer executive chairman Garry Hounsell criticised poor decisions and competition “failures” under former chief executive Richard Umbers leadership as $524.5m wipe-out of its goodwill slashed the value of Myer’s brand name.

He said the first half was blighted by poor strategy and rushed changes, including a failure to fight aggressive competition in the lead-up to Christmas.

“In addition, the execution of strategic initiatives could have been better managed,” Mr Hounsell said in a statement.

Myer, a business synonymous with the best of Australian retail, was founded in 1900 by immigrant Sidney Myer to grow at one stage be one of Australia’s most successful and largest retailers.

The awful result for the December half, which compares to a net profit of $62.8m in the prior period, has also forced Myer to skip paying a dividend to shareholders.

But directors of Myer and its chairman will share some of the pain, with Myer also announcing cuts to chairman and director fees.

Myer today reported its results for the 26 weeks to January 27 and, as the market had been expecting, it was a horror performance from the retailer as poor trading conditions and intense competition in the fashion sector crunched its profits.

Revenue for the first half was down 3.6 per cent to $1.719 billion.

The net profit before impairments was $40.1 million, in line with guidance given in February.

But the damage to Myer’s bottom line was inflicted by a series of write-offs and restructuring charges which the company had warned the market about in February.

According to its latest accounts, Myer has booked $6.5 million in restructuring and redundancy costs, $7.24 million in store exit costs and a massive impairment of $524.5 million against the value of the goodwill on its books.

At a trading update in February, which saw it unveil another profit warning, Myer said souring sales through Christmas had worsened into January and February, with total sales in the first half to be down 3.6 per cent and on a like-for-like basis down 3 per cent.

It said it expected its first half profit to be between $37 million and $41 million before writedowns and impairments.

In 2015, Myer raised $221 million to fund its “New Myer” strategy, which promised to halt the two-decades-long run of flatlining sales and profits, with $600 million to be invested in stores and technology to help drag the department store retailer into the modern world and improve both its in-store experience as well as online.

However, those promises have fallen flat.

The disastrous result, its worst since Myer listed in 2009, is set to inflame the ire of the department store’s biggest shareholder, billionaire Solomon Lew, who through his listed fashion conglomerate Premier Investments has a 10.8 per cent stake in the retailer and has been fighting to tip out the entire Myer board since last year.

In a statement this afternoon, Premier said today’s result “provided further evidence, if any was needed, that the Myer board should be removed and replaced as soon as possible if the company has any hope of surviving”.

Over the last year Myer shares have crashed, driven lower by shrinking sales and earnings, three profit downgrades, the loss of key management and in February the ejection of its former CEO Mr Umbers.

The steep share price falls led to the stock being removed the top 200 public companies on the Australian share market earlier this month.

Since Mr Umbers’ departure, Myer chairman Garry Hounsell has taken on the duties of executive chairman as the search continues for a new CEO. Myer said today it had started interviews for a new boss.

Mr Hounsell today said certain elements of the company’s strategy could have been better executed, such as targeting a new high-value customer without paying enough attention to Myer’s traditional customer base.

Mr Hounsell said he has been “driving the management team to trade the business more aggressively”.

“The renewed focus on product, price and customer service is expected to re-engage our traditional customer base,” Mr Hounsell said.

He also blamed the poor first-half result in part on the failure to respond appropriately to heightened competition prior to Christmas.

A rare bright spot for Myer: the company said online sales increased nearly 50 per cent in the fiscal first half.

Mr Lew has waged a bitter and increasingly personal battle against Mr Hounsell, accusing him of lacking retail experience.

Mr Lew recently obtained a copy of the Myer share register and is seeking to soon call an EGM where he will seek to kick out all directors and replace them with a new board.

Garry Hounsell took over as Myer’s executive chairman after CEO Richard Umbers departed. Pic: Stuart McEvoy