Myer half-year profit reflects growing optimism
A rising tide of consumer confidence, swelled by strong jobs growth and low interest rates, looks to be dragging the retail sector out of its malaise as Myer posted a better than expected half-year profit.
Myer chief executive Bernie Brookes said the retail environment, although fragile, was showing signs of improvement.
The country's biggest department store is on track to ring up four consecutive quarters of comparable store sales growth for the first time since 2009 when its private equity owners were preparing for a float. "I think there are some good signs," Mr Brookes said on Thursday as he unveiled a half-year net profit of $87.9 million, up 0.7 per cent, on a 1.7 per cent lift in sales to $1.73 billion.
Positive sales momentum had spilled into February from Christmas, raising hopes that the current quarter would hit same-store sales growth targets. "House prices are not declining, we have seen the equity market improved and that has certainly helped superannuation, unemployment levels [are] not getting worse and we have seen [low] interest rates ... so there are lots of good things that are impacting the consumer psyche," Mr Brookes said. Investors liked what they heard, sending Myer shares up 17¢ to $3.07.
Myer's upbeat assessment comes as labour force figures released on Thursday showed the unemployment rate steady at 5.4 per cent in February, and the largest monthly employment gain in 13 years.
But Mr Brookes, who will retire next year after leading the department store for eight years, warned there were still some events that could knock the economy down a notch and send consumers back to saving rather than spending.
"You have still got things like what happens with the debt in the US, issues with fragile European economies, right the way through what has been happening all over the world with mother nature ..." he said. "I don't think it's back to buoyant times ... we are not seeing onwards and upwards and people suddenly spending, we are seeing some signs of that, still reasonably fragile."
The strength of that recovery will be on show next week when rival David Jones releases its first-half results along with the Just Group, owner of Just Jeans and Portmans, and outdoor adventure retailer Kathmandu.
Myer said it picked up on the rising wave of consumer optimism, helped by a strong second-quarter performance that flowed from a solid Christmas and stocktake trading period, as well as the continued improvements to its business through cost cutting and higher penetration of its Myer-owned brands.
"We are delighted that sales in Myer exclusive brands grew by 10 per cent to $343 million during the half and now represent 19.8 per cent of sales, up from 18.3 per cent at the same time last year, reflecting the increasing customer support for these well-recognised brands," he said. Cosmetics, fashion accessories and clothing were the best-performing categories, and were well ahead of last year in both sales and gross profit. The best-performing states were Western Australia and Queensland.
Many of these categories were also boosted by a freeing up of floor space as Myer exited some product lines. "The exit and rationalisation of categories including whitegoods, gaming and consoles, CDs and DVDs, that we commenced in 2010 has been completed with the space reallocated to higher-margin fashion categories," Mr Brookes said.
Myer declared an interim dividend of 10¢ a share, fully franked, to be paid on May 9.
InvestSMART FORUM: Come and meet the team
We're loading up the van and going on tour from April to June, with events on the NSW central & north coast, the QLD mid-north coast and in Perth, Adelaide, Melbourne, Sydney and Canberra. Come and meet the team and take home simple strategies that you can use to build an investment portfolio to weather any storm. Book your spot here.
Want access to our latest research and new buy ideas?
Start a free 15 day trial and gain access to our research, recommendations and market-beating model portfolios.Sign up for free