Myer’s profit slide to continue

MyerSolid sales growth at Myer over the Christmas period is not expected to reverse its long run of sliding profit.

The department store chain’s operating costs and multi-million dollar transformation plan will likely offset sales growth in the six months to the end of January, analysts say.

Chief executive Richard Umbers will deliver Myer’s half year financial results on Thursday, one year since he was parachuted into the top job to replace Bernie Brookes.

After four years of profit falls, the troubled retailer in September launched plans to spend more than $600 million over five years to turn around its fortunes.

The plan includes the rollout of Topshop Topman stores inside more than 20 Myer stores, after it bought a 25 per cent stake in the British label’s Australian arm.

Myer is focussing on high profile brands and will reduce its store network by up to 20 per cent to focus on its flagship stores.

Its Top Ryde City store in Sydney has already gone, and Myer announced last week it will close Brisbane’s Brookside shopping centre store in January 2017.

IG market strategist Evan Lucas says Myer stores in western Brisbane, western Sydney, and Melbourne’s far east and west have lower turnovers, and are likely to be in the firing line.

“Their core stores are the ones in the city centres,” he said.

“People will be looking for more guidance on the transformation strategy.”

Lucas said investors are also keen to know how fast Myer will roll out its new Topshop stores, and at what cost.

Myer is expected to show robust sales growth for the half, given other retailers have reported strong growth, in a sign consumer spending has picked up.

But analysts are not expecting sales growth to be enough to offset the retailer’s hefty operational expenses.

“Everything else is expected to go backwards,” said Lucas.

“Earnings before interest and tax is expected to decline by about six per cent and net profit to fall about two per cent.”

The department store is also likely to remain the subject of takeover speculation, optionsXpress market analyst Ben Le Brun said.

“The result is not expected to shoot the lights out,” he said.

“I say chatter about it being a takeover target will continue.”

AAP

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