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Highlights

  • Stock Drop: Myer shares tumbled 10% to 68 cents after weak half-year results.
  • Profit Decline: Underlying NPAT fell 18.5% to AU$42.4 million, hurt by margin pressures and operational disruptions.
  • Ongoing Challenges: Sales have declined 2.6% in the second half so far, with National Distribution Centre (NDC) issues persisting.

Shares of Myer Holdings Ltd (ASX:MYR) took a sharp dive on Wednesday morning, plunging 10% to 68 cents following the release of its half-year financial results. Despite modest sales growth, margin pressures and operational challenges weighed heavily on investor sentiment.

For the 26-week period ending 25 January 2025, total sales rose by just 0.1% to AU$1.83 billion, while group comparable sales grew 0.8%. These figures reflect the closure of the Brisbane and Werribee stores, along with ten standalone sass & bide locations.

Margin Pressures and Operational Hurdles

While Myer managed to maintain sales, operating gross profit (OGP) fell 1.4% to AU$656 million, with the OGP margin declining 53 basis points to 35.8%. The company attributed this to:

  • A shift in sales mix toward concessions
  • Heightened promotional activity
  • Increased distribution costs due to complications at its new National Distribution Centre (NDC)

Myer estimates that NDC issues reduced earnings before interest and taxes (EBIT) by AU$12 million, with stock unavailability, higher online fulfillment costs, and dual site expenses all impacting performance.

Additionally, the cost of doing business (CODB) rose 1.9% to AU$457.8 million, driven by inflationary pressures, increased employee costs from enterprise bargaining agreements (EBA), and changes to superannuation policies.

Profit Decline and Dividend Announcement

As a result, Myer reported an 18.5% decline in underlying net profit after tax (NPAT) to AU$42.4 million, while statutory NPAT stood at AU$30.4 million after factoring in AU$14.1 million in implementation costs and strategic review expenses.

Despite these setbacks, Myer declared a fully franked dividend of 2.5 cents per share.

Management’s Perspective

Commenting on the results, Myer’s executive chair Olivia Wirth emphasised the company’s efforts to reset its business and drive long-term growth:

“We have been focused on resetting the business and positioning the Myer Group as a retail powerhouse. We have concluded our strategic review and started to implement our Myer Group Growth Strategy with the acquisition of Apparel Brands, established our new leadership team and capabilities, arranged refinancing, and commenced a restructure of sass & bide, Marcs, and David Lawrence.”

Wirth acknowledged the challenging macroeconomic environment but highlighted strong performance during the Black Friday and Christmas trading periods. She also noted that Myer’s loyalty program, MYER one, reached a record 4.6 million active members with a 79% tag rate.

Outlook

The company warned that the tough retail environment continues to impact its performance. Sales for the first five weeks of the second half are down 2.6% compared to the prior year, and ongoing NDC complications are expected to weigh on financial results in the near term.