Chanticleer in 'AFR' - to be in the paper tomorrow - looks to be agreeing with you, up to a point:

Myer’s sales strength is great for consumers, but bad for investors

The department store hit its stride right as its customers were starting to feel the pinch. That’s been good for consumers wanting bargains but bad for shareholders.

Aug 8, 2023 – 12.33pm

One good half in a row for Myer!

It was only six months ago that the department store soared back to profitability, recording a $65 million profit in its strongest start to a financial year in nearly a decade and even treating shareholders to a special dividend.

Unfortunately for shareholders that momentum has proved short-lived, at least as far as profitability is concerned, as cost of living pressures hit shoppers.

Myer CEO John King will front investors and analysts at next month’s full-year results. David Rowe

The retailer expects only $4 million to $8 million additional profit for the second half of the year (the six months to the end of July), for a grand yearly total of $69 million to $73 million.

Investors, well aware of the consumer sentiment and the interest rate environment, had positioned for earnings to slow. Myer’s shares had sunk from 90¢ to back to about 70¢ since in the past three months.

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However, Myer’s second half was worse than expected at the profit line. Consensus forecasts (albeit a very thin consensus with only two analysts covering it and captured by Bloomberg’s numbers) was for an $87 million full-year profit.

The stock dropped 14 per cent in early trade.

While profit was materially lower than expected, Myer’s sales were strong at $3.36 billion for the 12-month period, marginally above consensus forecasts. It suggests the retailer resorted to discounting to clear stock, which is good for sales and inventory levels but hit profitability.

Results spoiler

CEO John King, who is due to leave next year, was not speaking on Tuesday. In a statement to the ASX, he said sales and profit rose from the year before despite “macroeconomic headwinds that have buffeted the retail sector throughout the second half”. He said the group was focused on costs, inventory and cash to look after its balance sheet, given the macroeconomic pressures.

King will speak at Myer’s results next month, but investors were looking for takeaways from Tuesday’s numbers which were a spoiler to full-year results day.

The obvious message was about the pressure on retailers, particularly those selling clothes or household goods. Retailers are moving stock; however, customers are largely waiting for promotions which put pressure on earnings margins.

As for Myer, it has been a bit unlucky. It hit its stride just as its customers started reining in spending. Importantly, the company said online sales were back in growth in the second half, up 3.2 per cent, while annual online sales were up 163 per cent compared to pre-pandemic levels.

King’s departure looms large for the retailer. He’s generally liked and well-regarded by fund managers, and implemented strategies to see the retailer able to make profits even in tough times. Myer’s board has recruitment firm Egon Zehnder hunting for a replacement.