Myer sales slow in second half but dodges worst of retail rout as economy slows

Sales have slowed in the second half to almost a complete halt, but the department store looks to have dodged the worst of the retail rout as the economy slows.

The nation’s largest department store Myer has witnessed a significant slowdown in sales since January as cost of living pressures keeps shoppers away, but it looks to have dodged the worst of the rout hurting many other retailers with its annual profit and sales still growing for 2023.

Myer has updated the market to its trading performance for the 2023 financial year to forecast a net profit of between $69m and $73m, an increase of between 15 per cent and 21 per cent on 2022 and total sales to be up 12.5 per cent. The bulk of those profits were captured in the first half, dominated by the traditional Christmas and Boxing Day sales events, with second half profit to be as low as $4m and as high as $8m.

Its online sales have also bounced back, with Myer saying that group online sales for the second half of fiscal 2023 returned to growth of 3.2 per cent. However, after a burst of sales activity through the pandemic, online sales for the full year were down 4.5 per cent to $690.5m.

However, shares in Myer fell more than 10 per cent on the trading update with the full-year profit pencilled in by some analysts at more than $85m and the department store’s performance showing the strains of the immense pressures now on consumers and household budgets caused by elevated cost of living expenses.

Shares in Myer ended down 10c, or 14 per cent, at 61c. Myer shares were changing hands at prices above $1.10 earlier this year as soaring sales and a special dividend gave many investors and the market the confidence that the worst was behind the national retailer.

The nation’s $400bn retail sector has been under considerable pressure since the Reserve Bank started hiking up interest rates last year, with soaring inflation adding to cost of living pressures that were squeezing household budgets and reining in consumer spending.

This has dented the sales and profit performance of many discretionary retailers, especially department stores such as David Jones and other general merchandise stores, but Myer has so far missed the worst of these impacts as reflected in its trading update to the market.

In an ASX statement, Myer said its second-half sales growth had slowed to only 0.4 per cent on the same period last year, with sales momentum from the first half almost grounding to a complete halt.

However, full-year sales for 2023 were still strongly positive and up 12.5 per cent on fiscal 2022 to $3.36bn and up 12.4 per cent on 2019.

Myer said second-half net profit of between $4m and $8m was despite the prevailing headwinds generated from the macroeconomic environment affecting sales, margin and costs of doing business. The full-year results would also include significant items and implementation costs, including store and distribution centre exit costs.

The retailer will end its fiscal 2023 with net cash of around $120m, down from $186m at the end of 2022. Myer anticipates releasing its 2023 final results during September.

Myer chief executive John King said its ‘Customer First Plan’ had continued to deliver both positive sales growth and positive profit growth in fiscal 2023, despite the prevailing macroeconomic headwinds that have buffeted the retail sector throughout the second half.

“We continue to tightly manage costs, inventory and cash to ensure we have a strong balance sheet as we begin fiscal 2024 where we expect the ongoing uncertainty around the macroeconomic environment to persist.”

In June, Myer announced that Mr King would retire from his role next year.