If the theme of the recent earnings reporting season was one of higher profits on sluggish revenue growth, then Myer (MYR) has successfully bucked the trend.
Despite the weakest consumer sentiment in living memory and exceptionally soft sales in the second half, the retail emporium managed to lift its top line revenue, even if by a measly 0.8%.
Unfortunately, that didn't translate into gains in the bottom line. Net profit fell 8.7% – more than expected – to $127 million.
Overall, it was an unimpressive result, with Myer boss Bernie Brookes holding out little joy for the future.
Brookes blamed Myer's escalating cost of doing business, which rose 3.1% in the past year, on the carbon tax and the growth in penalty rates, pinning his hopes on the newly elected coalition government's promises to address those areas (see Abbott's financial challenges by Robert Gottliebsen).
Myer's problems, however, extend far beyond those issues and Brooke's other bugbear: the fact that foreign online retailers do not have to pay the 10% Goods and Services Tax on sales under $1,000.
The main problem is that Myer didn't anticipate the effect of the internet, was slow to adopt an online strategy and, like David Jones (DJS), has been left floundering as consumers enthusiastically embraced the new shopping concept.
Alarmingly, Myer's cost of business – which already accounts for 32% of total sales – is forecast to rise as much 5% this year as the company embarks on a series of store refurbishments.
Not surprisingly, Myer stock was hammered at the opening , dropping 4%, after a strong performance during the past 12 months that has seen the retailer up 56%, fuelled by hopes of a turnaround in discretionary retail as consumer confidence recovered.
Despite all the fluff of five point plans and omni-channel strategies, it is difficult to ignore the fact that some discretionary retailers are doing well now and perhaps the time has come for Myer to start examining the closure of non-performing stores.
The company was floated at a ridiculous multiple with promises of stunning earnings growth that failed to materialise, primarily because most of the earnings growth and the cost savings had been skimmed off by its private equity owners before its 2009 Melbourne Cup day float.
Listing at $4.10, it sank from day one and has never looked close to ever reaching those lofty heights. It was down 4% at $2.73 at the open this morning.