In the face of challenging trade conditions and a cautious consumer climate, Australian department store giant Myer Holdings [ASX:MYR] is projecting a boost in profits for FY23.
Early sales figures have painted a picture of growth, defying the odds and signalling Myer’s resilience in a shifting retail landscape.
However, falling consumer sentiment and interest rate hikes still working their way through the economy have created headwinds that have left 2H23 sales down and investors concerned about the retail giant today.
Shares are down 13% this afternoon, trading at 61.8 cents per share. Today’s sell-off somewhat dampens what has been a successful year of growth for the company, which has seen its shares rise 23.50% in the past 12 months.
Source: TradingView
Myer navigates tough headwinds
Myer released its trading update and future guidance for FY3 today. The performance was overall better than many had anticipated from the retail giant.
However, investors still pressed the sell button as economic outlooks were uncertain.
Myer’s first half of the year sales were up 11.9% compared to FY22, while the second half of the year painted a much bleaker story, with total sales up only 0.4%.
This meant FY23 year total sales were up 12.5% on last year, at $3.33 billion.
Within these figures, Myer saw online sales fall 4.5% to $690.5 million, representing 20.5% of total sales.
Compared to FY19, Myer’s online sales are up 163.2%, which signals the considerable changing consumer habits after the effects of the 2020 lockdowns.
This digital pivot is indicative of the broader industry trend towards increased online shopping.
Myer will eke out a small second-half profit of between $4 million and $8 million, excluding items like store and distribution centre exit costs.
Myer’s bottom-line profit for the full FY23 is expected to be between $69–73 million, an increase of between 15–21% on the previous year.
A commendable effort, considering the volume of retail goods and services consumed by households fell by 0.5% in the three months to June, according to Australian Bureau of Statistics data released this month.
Sharp falls were recorded for household goods such as appliances and purchases at department stores.
John King, the outgoing CEO of Myer, attributes the company’s performance to the steadfast execution of the ‘Customer First Plan’. A strategic approach that they attribute to the growth seen earlier in the year and counteracting the headwinds that they face now.
He commented on his approach today, saying:
‘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.’
‘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.‘
Outlook for Myer
As Myer sets its sights on the coming financial year, uncertainties continue to loom large on the macroeconomic horizon.
The company’s commitment to judiciously managing costs, inventory, and cash underscore its determination to maintain a robust balance sheet in the face of uncertainties.
Despite this resilience, Myer clearly issued a cautionary note regarding the second-half sales performance.
Investors have been spooked by the steep sales slowdown, which only saw a 0.4% increase compared to the same period in the previous year, and these fears could be well founded.
This deceleration is attributed to consumers grappling with the impact of successive interest rate hikes, and their consumption of clothing and household goods has fallen sharply.
Source: ABS
The changing of the guard is also a notable development within Myer’s trajectory.
With John King signalling his departure, the company’s board has engaged Egon Zehnder to spearhead the search for a new Chief Executive Officer.
This transition adds a layer of intrigue to Myer’s journey as it navigates both leadership changes and an evolving retail landscape.
In anticipation of these shifts and to provide stakeholders with a comprehensive view of its financial performance, Myer is slated to release its full-year financial accounts in September.
As the retail sector remains in flux, Myer’s resilience and ability to adapt to shifting a shifting landscape position it as a key player to watch in the months ahead to scope the level of pain the wider economy may feel.
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