Myer sales, profit sink as shoppers snub fashion brands
The embattled retailer has warned on profit again, as weary shoppers pull back on spending, with fashion brands Sass & Bide and Marcs underperforming.
Myer’s new executive chairman Olivia Wirth is facing an immediate test of her retail nous after the department store owner revealed weaker sales and a one third slide in profits due to tougher trading conditions, inflationary pressures and weak trading by some of its key fashion brands.
The shrinking sales and profit lines come as the Myer board led by Ms Wirth consider a deal to buy a stable of fashion and apparel brands from billionaire retailer Solomon Lew’s Premier Investments, which would see Myer break out of its 124-year history of being an operator of multi-level department stores to own chains such as Portmans and Just Jeans.
That proposal, first announced in June, is still being examined by both Myer and Premier Investments but it is being considered just as the discretionary fashion and apparel category struggles under the weight of a downturn in consumer sentiment, rising costs and cost of living pressures for shoppers.
On Thursday Myer gave further insight into those economic pressures now squeezing the retailer sector, updating the market that sales in the second half were barely positive and that its total sales for the last financial year slipped 2.9 per cent – driven by a mix of a pullback in consumer spending and the decision to shut down two stores.
However, Myer said a poorer than expected performance by its wholly owned fashion brands Sass & Bide, Marcs and David Lawrence, which were at one stage under review for sale but which will now be kept, had punished its profitability for the full year.
Myer said in its trading update that it expects a full-year net profit of $50m to $54m, down from $71.1m in 2023 with the stumbling brands Sass & Bide, Marcs and David Lawrence representing roughly half of the year-on-year profit decline.
The department store owner said in terms of expected sales for 2024, second half same store sales rose 0.8 per cent to the second half of 2023 with full-year same store sales up only 0.4 per cent.
Total sales in 2024 are expected to be $3.27bn, down 2.9 per cent.
Myer shares fell almost 10 per cent on the trading update before closing down 7.1 per cent, at 78c each.
Myer blamed the challenging consumer and trading environment, impact of store closures, inflationary cost pressures; and the underperformance of Sass & Bide, Marcs and David Lawrence due to the weak trading environment and additional discounting.
It comes as Myer’s board, led by former Qantas loyalty boss Ms Wirth, considers a tie-up with Mr Lew’s Premier Investments that would see Myer buy Premier’s apparel arm which owns brands Just Jeans, Jay Jays, Portmans, Jacqui E and Dotti. This would hand to Myer, whose biggest shareholder is Mr Lew’s Premier Investments, a fashion and apparel division that generates $845m in revenue from 717 stores.
But it comes at a time too when discretionary retailers, especially in fashion, are facing a cautious consumer and a decline in sales.
Ms Wirth said the second half sales performance for Myer demonstrated resilience in the face of this difficult trading environment, coupled most notably with the closure of its Brisbane CBD store and the underperformance of the Sass & Bide, Marcs and David Lawrence brands.
“In the current challenging trading conditions, we are acutely focused on optimising operational performance including tightly managing costs, inventory, and margins and fully leveraging our MYER one loyalty program,” she said.
“We are also positioning the business for growth and are well progressed in a comprehensive strategic review of the business. We look forward to discussing the strategic review at an investor presentation in October.”
Citi analyst James Wang said Myer’s trading update highlighted the elevated level of discounting in the apparel category given weak demand and that cost pressures remained a “sore point’ for the sector.
“Myer’s flat-to-up sales for the second half look modest in comparison to recent positive trading updates from Accent Group and Universal Store. This further confirms that trading in the category has been mixed.”
With the future of Myer and Premier Investments now closely linked - as a deal to sell Premier Investments’ apparel division to Myer is examined by both boards - Mr Wang said Premier Investments’ own stable of apparel brands are likely to post a 1.4 per cent slide in like-for-like sales over fiscal 2024.
He is more upbeat about the standout divisions of Peter Alexander and Smiggle which should bolster Premier Investments’ performance with positive same store sales.
“We remain positive on Premier Investments given the pending strategic review and potential synergies,” Mr Wang said reflecting on the possible deal to be done with Myer.
Myer and Premier Investments are slated to report their full-year results in September.
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