Australian retail stalwart Myer posts worst annual profit since listing

Australia’s biggest department store operator Myer Holdings Ltd on Thursday posted its lowest annual profit since listing amid a seemingly unstoppable wave of competition, and warned it was continuing to trade below expectations.

The retailer also matched the previous year’s record-worst dividend and declined to offer earnings guidance as it asked investors to back a turnaround based on shutting stores and ramping up online sales.

The result affirms Myer’s standing as the highest-profile retail-sector casualty of wage stagnation and an onslaught from cheaper global rivals like Amazon.com Inc and ASOS Plc .

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“It was a weak result, there was no surprise there, they have a weak outlook; they are still going through structural changes,” said Mathan Somasundaram, a trader at Blue Ocean Equities.

“Things don’t look well for them with Amazon entering the space,” Somasundaram added, referring to the retail juggernaut’s plan to open a warehouse in Australia.

Once one-off costs like store closures were included, Myer said net profit tumbled 80 percent to A$11.9 million ($9.53 million) in the year to July 29.

Underlying net profit fell 1.9 percent to A$67.9 million, still its lowest since listing. That was within the A$66 million to A$70 million range the company offered in a profit downgrade in July.

Myer shares were up 2 percent at 73.5 Australian cents by midsession, in a flat overall market, as traders betting on future declines, known as “short sellers”, piled onto the stock. The shares sold for A$4.10 when the company was listed in 2009, and have never traded over that level.

SALES MISS

Sales fell 2.67 percent to A$3.2 billion for the year. The company said sales for the first six weeks of its fiscal 2018 were below its expectations.

Chief Executive Officer Richard Umbers told analysts he could not give earnings guidance for the current fiscal year because the leases on three stores earmaked for closure were still being negotiated.

“So far we’re only six weeks into the financial year. Sales were below expectations. That’s all we can say at this stage,” Umbers said.

Deutsche Bank analyst Michael Simotas said in a note that speculation about “potential corporate interest” in a Myer takeover may limit the downside for shareholders.

Intensifying competition in Australian retail is also hurting Myer’s traditional rival David Jones. Its South Africa-listed owner, Woolworths Holdings Ltd, last month posted its first decline in annual profit since 2009.