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Myer Holdings (ASX: MYR) has forecast a marginal lift in sales for the second half in the latest sign that consumers are tightening their belts, but the department store operator is still expecting a healthy lift in net profit for the full year.
That didn’t stop investors heading for the doors as Myer’s share price slumped more than 14 per cent on the news.
In a trading update issued to the ASX this morning, Myer says total sales for the second half of FY23 were up just 0.4 per cent, reflecting a tougher retail climate.
However, despite the headwinds the company says it expects full-year sales for FY23 of $3.36 billion, up 12.5 on the previous year.
Net profit after tax is forecast to land between $69 million and $73 million, which is up between 15 and 21 per cent compared with FY22, marking a continued run of growth for the company.
The forecast result shows that most of Myer’s profits were generated in the first half, as NPAT for the second half is likely to shrink to between $4 million and $8 million as lower sales and margins combined with higher costs.
Outgoing Myer CEO John King has given an upbeat assessment of the company’s fortunes in a challenging environment.
“Myer’s Customer First Plan has continued to deliver both positive sales growth and positive profit growth in FY23, despite the prevailing macroeconomic headwinds that have buffeted the retail sector throughout the second half,” King says.
“We continue to tightly manage costs, inventory and cash to ensure we have a strong balance sheet as we begin FY24 where we expect the ongoing uncertainty around the macroeconomic environment to persist.”
King plans to retire as Myer CEO next year after overseeing a massive turnaround in the company’s performance since taking on the job five years ago. Myer says it has engaged search firm Egon Zehnder to find a replacement after King decided earlier this year to move on for family reasons.
The latest earnings update shows that Myer has built momentum over the past five years with total sales of $3.36 billion for FY23 up 12.4 per cent on FY19, the previous full year prior to the pandemic.
The company has revealed that group online sales for the second half of FY23 returned to growth, rising 3.2 per cent on the previous corresponding period.
However, FY23 group online sales are down 4.5 per cent to $690.5 million, which the company says reflects the favourable impact of store closures in first half of FY22.
Online sales represent 20.5 per cent of total sales and they are up 163 per cent compared with FY19.
Myer says its balance sheet remains strong through tight inventory management with its inventory levels expected to be level with the same time last year.
However, the company’s net cash position of about $120 million for FY23 compares with $186 million at the end of FY22.
Myer expects to release its audited full-year results in September.
The company’s shares were trading at 61c at 11.15am (AEST), down 10c or 14 per cent.
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