Myer to close more stores after annual profit falls 1.9pc

Myer will close more stores and slash its dividend after tough trading conditions cut its underlying full-year profit 1.9pc.

The Myer retail store at Centro Roselands in Sydney. Pic: AAP

Myer, the nation’s biggest department store, has posted a full-year underlying net profit of $67.948 million, down 1.9 per cent, as tough trading conditions in the fashion and apparel sector crunch its performance.

The figure is at the bottom of the earning range forecast when the retailer shocked investors with a profit warning in July.

Myer’s statutory net profit actually fell 80.4 per cent to $11.9 million, its worst profit result since it listed in 2009 as writeoffs, impairments and charges of $56 million collapsed bottom line earnings.

The poorer result has also seen Myer (MYR) slash its final dividend by one third.

There will also be more store closures as chief executive Richard Umbers slims down the business, announcing Myer will not renew leases at Colonnades, Belconnen and Hornsby.

Since 2015 Myer has closed or announced the closure of 74,670 sq/m of store space.

Myer said revenue for fiscal 2017 was down 2.67 to $3.201 billion. Like-for-like sales for the year were down 0.2 per cent.

Myer shares were up 2.5 cents at 74.5c in early trade.

Myer’s sales and profits have hardly budged since it listed on the ASX in 2009.

In 2010, when it reported its maiden full-year result as a listed company, its profit was $67.1 million on sales of $3.32 billion.

The retailer today announced a final dividend of 2 cents per share, payable on November 9, and down from the 3 cents per share final dividend paid in 2016. It takes the full year dividend to 5 cents per share, flat with last year.

Mr Umbers said Myer had made significant progress in its transformation plan under the “New Myer” strategy, which had helped the company withstand challenging retail trading conditions characterised by heightened competition, subdued consumer sentiment and “discount fatigue”.

“We are obviously disappointed to have not reached our target of exceeding last year’s net profit of $69.4 million and that progress against our metrics that matter is slower than we anticipated.”

Myer chief Richard Umbers ahead of the December sales. Pic: Josie Hayden

In July, Myer warned it expected net profit in the 2017 fiscal year to be between $66 million and $70 million, before implementation costs and significant items. The company had previously expected net profit to be above $69.3 million before implementation costs. It also flagged at the time a $45.6m hit from the Topshop and sass & bide businesses, the former which collapsed and the latter which has taken a sharp writedown.

Sales as measured per square metre across its stores were up 3.7 per cent in 2017 compared to the 2015 base year.

Operating gross profit was $1.22 billion, with margin down 58 basis points to 39.12 per cent, reflecting the higher concession mix in its stores.

It has been a tough year for Myer as Mr Umbers tries to turn around the fortunes of the department store against persistent headwinds of poor trading conditions.

In May, Myer reported that its total sales fell 3.3 per cent in the fiscal third quarter, with the fall ending a run of 13 consecutive quarters of same-store sales growth.

The tough conditions recently saw arch rival David Jones post a 25.3 per cent drop in earnings to $127 million in the 12 months ending in June.

Hianyang Chan, senior research analyst at Euromonitor International, said Myer continues to struggle to find a place for itself in the rapidly changing fashion sector, especially in the wake of the looming arrival of Amazon and other retail disruptors.

“Myer continued to struggle within the department stores category to create a defined position in the competitive and challenging retail environment,” he said.

“The inexorable march of technology has wired its way into the retail sector and e-commerce giants such as Amazon, Alibaba and Rakuten are formidable powerhouses that are disrupting retail businesses globally, and categories such as consumer electronics and appliances, home and garden, apparel, accessories and footwear are increasingly migrating online.

“The impending arrival of Amazon will pose a threat to most major retailers and Myer will be no exception. In a highly competitive, fast moving industry where consumers’ expectations and demands change rapidly, it is expected that Myer will continue to push to offer even leaner, faster responses to consumers’ demands, embarking on innovative marketing campaigns and further enhancing their omni-channel offerings to improve customers’ shopping experience.”