Myer half year results plummet on $500m writedown
Written on the 21 March 2018 by David Simmons
Beleaguered retail chain Myer's (ASX: MYR) tarnished reputation has seen its half year results crash to a new low, reporting a net loss after tax of $476.2 million.
The group's pre-implementation NPAT was in line with previously announced expectations at $40.1 million, however the company was hit by a non-cash impairment charge of $500.2 million on the carrying value of Myer goodwill and brand name intangibles.
The loss of $476.2 million is a significant drop from the group's half year report in 2017, down 857.9 per cent from last year.
Because of the group's disappointing half year result the company has announced a renewed company-wide focus on product, price, and customer service, in a last ditch attempt to improve trading.
"Results for the half-year were unsatisfactory and reflected a number of execution issues including, for example, the failure to respond appropriately to the heightened competitive environment prior to Christmas," Myer Executive Chairman, Garry Hounsell, says in a statement.
"In addition, the execution of strategic initiatives could have been better managed."
The company has been on a steady downward spiral over the last year, with pressure from international retailers entering the Australian market like Zara, H&M, and Uniqlo undercutting the Aussie retailer.
The company's reputation took another hit in early March 2018 when the company tumbled off the ASX200 index as its share price continued to collapse.
Total sales were down 3.6 per cent compared to the first half of 2017, topping out at $1.7 billion and online sales grew by 48.9 per cent to $105.2 million.
The company is sitting with net debt of $19.9 million at the end of the first half, with available liquidity of $400 million.
Garry Hounsell says that while the results are disappointing, there is a glimmer of hope for the retailer in the form of the company's promising online results. The online business for Myer now represents the group's third largest store.
"Myer now has one of the largest and fastest growing online businesses in Australia," says Hounsell.
"We are investigating the viability of establishing both online and loyalty as separate business units to give them more prominence as future growth drivers."
Hounsell continues to say that the results for the half-year are unsatisfactory and reflect a number of execution issues particularly the group's failure to respond to the heightened competitive environment prior to Christmas.
Sales were up for the group's 'master brands' including Basque, which recorded an increase of 15 per cent, and Piper, with sales up 10 per cent.
The company is still in the process of identifying a suitable CEO candidate to replace Richard Umbers who stepped down from the position in February 2018. At the time, Hounsell said the board could no longer tolerate underperformance and that a leadership change was needed to reshape the company's future.
Myer's significant NPAT loss of $476.2 million is in stark contrast to Premier Investments' (ASX: PMB) half year NPAT of $110.5 million. The company, helmed by chairman Solomon Lew, who has an 11 per cent shareholding in Myer, has been pushing for a total reshuffle of Myer's board since late 2017.
The disappointing Myer result is sure to add fuel to Lew's fire, especially considering he lost $63 million on Myer since taking his stake in the company a year ago.
Shares in Myer are up 3.49 per cent to $0.44 per share at 10.21am AEDT.
Business News Australia
Author: David Simmons