Myer suffers profit slide

myer david jonesNew Myer CEO, Richard Umbers, says the department store group has lost relevance with customers after it suffered a 23 per cent slide in its first half profit and downgraded its full year guidance.

Myer has downgraded its full year profit guidance to between $75 million and $80 million, well below analysts expectations of a $90 million profit and last year’s $98.5 million result.

The downgrade coincided with the troubled retailer reporting a profit of $62.2 million for the six months to January 24, down from $80.8 million.

The profit slide came amid weaker than expected sales and an increase in costs linked to refurbishments and other investments.

New CEO, Richard Umbers, who ascended to the top job earlier this month after the departure of long serving CEO Bernie Brookes, admitted Myer had lost relevance with customers.

He said the company would overhaul its operations to win back customers.

“Some elements of the existing strategy represent solid retail fundamentals,” he said.

“However, overall it did not deliver a business model able to respond to this new retail environment and we have lost relevance with some customers.”

The company is carrying out a strategic review of its business, which some analysts say could result in store closures.

Total sales rose 1.5 per cent to $1.76 billion during the first half, while the cash cost of doing business was up 6.2 per cent to $570 million.

“We acknowledge that in recent years, cost growth has outpaced sales growth, and profits have declined,” Umbers said.

Myer expects to lift total sales between three and four per cent during the second half but expects profit margins to fall between 15 and 30 percentage points.

The company cut its interim dividend by two cents per share to nine cents per share, fully franked.

AAP

Comments

3 comments

  1. Jas posted on March 19, 2015

    The title of this article "Myer suffers sales slide" is contradicted by the content. I.e., "Total sales rose 1.5 per cent". Maybe the title should be "Myer suffers profit slide"? What seems to be happening at Myer is that while sales are incrementally increasing or staying flat, the costs of doing business are increasing. A reduction in operating costs combined with a successfully executed strategy that attracts new customers and generates growth would be a winning combination.

  2. Editor posted on March 19, 2015

    Thanks for pointing out the mix up Jas, we've amended that now. - Ed

  3. Peter posted on March 19, 2015

    Its really amazing that Myer have put in place CEOs that earn millions but are stating the obvious, everyone knew years ago that Myer has lost relevance with consumers, all they needed to do was ask the people on the ground floor and the consumer in the street. Perhaps they should have let Solomon Lew stay on and be at the helm as he has retail experience and the knowledge and with some certainty Myer would not be the basket case that it is today. Myer needs to decide who they are and who they are appealing too before anything changes to any great extent. Richard Umbers will only be able to turn the store around if he has the vision and the right people behind him to execute the plan, Myer is fast approaching a cliff and needs a solid leader with the right direction.

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