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Myer quick to deflect blame after poor results

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Mark Hawthorne and Eli Greenblat

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Myer profits slump as boss diverts blame

National business editor Mark Hawthorne explains the financial woes facing retail giant Myer as well as what chief executive Bernie Brookes thinks is to blame.

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Myer boss Bernie Brookes has blamed Australia's high wages, rents, taxes and utility costs for the department store's tough year.

"We remain cautious about the year ahead given the challenges of the economic outlook and consumer confidence" ... Bernie Brookes.

"We remain cautious about the year ahead given the challenges of the economic outlook and consumer confidence" ... Bernie Brookes. Photo: Justin McManus

The department store giant says tough conditions in the retail sector will continue into next year, as the tough economic outlook for Australia further impacts consumer confidence and spending.

Myer's full year net profit has fallen 8.7 per cent to $127.2 million, a result that came on the back of higher selling expenses.

Against that backdrop, Mr Brookes urged the new Abbott government to look at closing the GST loophole that allows online shoppers to spend up to $1000 on overseas goods without paying tax.

"Retail continues to be the biggest private employment sector in the country,' Mr Brookes said.

''All Australian retailers are being impacted by rising employment costs, escalating occupancy and utility costs, and a GST loophole providing an unfair advantage to foreign retailers. The sector would benefit from reform to help drive productivity and become more competitive in an increasingly global marketplace.''

Mr Brookes admitted that drooping sales for the department store in the final quarter of 2012-13, which helped deflate full-year profits, had pushed into the new year signalling the first quarter could see like-for-like sales down as much as 0.8 per cent.

‘"Several weeks into the new [financial year] our sales has continued to track the same rate for the last quarter," he said.

"May and June was a significant one off,’’ Mr Brookes explained, ‘‘first it was the middle of winter and was quite a warm winter in most states that what it had been and in addition to that we were circling the government hand out associated with compensation for the carbon tax [last year].’’

But Mr Brookes warned there had been no significant change in the downward sales momentum since the beginning of the new financial year.

‘‘July was better than May and June and ideally August has maintained the same level as the total of the quarter sales through the first seven weeks.’’

Myer's sales revenue for the year grew nearly 1 per cent, to $3.14 billion.

The company declared a final dividend of 8 cents a share, fully-franked, down on last year's 9 cents. It will be paid on November 14 to shareholders on the register at September 30.

In the year to July 27, Myer posted a net profit of $127.21 million – down on the previous year's $139.37 million.

Total sales revenue was $3.145 billion, a 0.8 per cent increase on the $3.119 billion recorded in the previous year.

The company declared a final dividend of 8 cents a share, fully-franked, down on last year's 9 cents. It will be paid on November 14 to shareholders on the register at September 30.

‘‘It is disappointing to see sales fall in the fourth quarter after four quarters of modest growth,’’ said Deutsche Bank analyst Michael Simotas, ‘‘but it was a particularly difficult period in the lead up to the election and the recent improvement in consumer sentiment may provide some relief.

‘‘Myer continues to stand out as the least expensive stock amongst its discretionary retail peers.’’

Citi analyst Craig Woolford said sales had continued to get worse through 2012-13.

‘‘Trends have deteriorated throughout the year. This result is even after excluding any stores disrupted by refurbishments.’’

Invast chief market analyst Peter Esho said Myer's guidance for 2014 was fairly soft, with the cost of doing business expected to rise another 4-5 per cent.

"There were hopes that the business will turnaround its fortunes in the very difficult retail space."

"This comes at a cash cost which means a high dividend payout ratio is not sustainable unless revenue starts to rise," said Mr Esho.

"Overall, there is perhaps not enough good news here to help offset the overarching challenges and we think Myer will struggle to see its share price rise above $3 until revenue really starts to take off."

Also today Myer announced it had purchased the remaining 35 per cent of fashion brand sass & bide it doesn’t own for $30 million, taking its ownership of the label to 100 per cent.

Mr Brookes said its investment in the brand had helped improve the business with sass & bide achieving double digit sales growth in 2012-13.

‘‘Since Myer acquired 65 per cent stake in the business in February 2011, sass & bide has delivered a consistently strong performance, growing sales by 45 per cent and profit by 112 per cent over the period.’’

with Max Mason

278 comments

  • Rising employment cost?

    One of the main reasons people don't buy from department stores now is you can't find any staff and when you do they are underage and under trained.

    Commenter
    Julian
    Date and time
    September 12, 2013, 10:28AM
    • Yup and now we casuals have less reason to work on the weekend with the changing penalty rates. Yaaay for Myer! I haven't found any official information on this but it's just what I hear.

      Commenter
      CasualRate
      Date and time
      September 12, 2013, 10:43AM
    • They should get rid of their men's department all together, if you're not going to make an effort to sell to men, why would we even bother. Its just wasted space.

      The men's department are mist likely low profit, but doing nothing to sell to men, means their probably a big loss there.

      The boutiques stores should get the out of Meyers, the few times I've been their (CBD lunch time) its a desert.

      I learned in high school department stores designed stores so it was easy for men to get in and out.

      Current lay out is opposite to that.

      Commenter
      cecil
      Location
      Sydney
      Date and time
      September 12, 2013, 10:46AM
    • Perhaps they should 'walk the floor' and see how difficult it is to actually pay someone for your purchases. I have walked out many times simply because there are no staff when you look around at the counters & occassionallly the staff that are there are busying themselves doing anything other than wanting to serve customers. Would you like us to 'self-serve'?

      Commenter
      Melissa
      Date and time
      September 12, 2013, 10:46AM
    • This is the guy that said the National Disability Insurance Scheme was bad because it meant that people could be spending the extra Medicare-levy in their shops instead. Then he refused to acknowledge the hurt his comments made. I've been a loyal David Jones customer ever since and Im not the only one. Maybe the problem is just Ben's incompetence and mismanagement.

      Commenter
      Myer is NOT My Store anymore
      Date and time
      September 12, 2013, 10:48AM
    • Give people a good retail experience and trained staff who actually understand that they exist in a service industry, and people will buy from retail outlets.

      Give them a rubbish experience, as all of these major retailers do, and people will buy purely based on price - i.e. over the internet.

      Commenter
      Ian
      Date and time
      September 12, 2013, 10:48AM
    • And remember that the GST was on the table for a tax review.
      Will Abbott look after his mates.

      Commenter
      bendou
      Location
      Sydney
      Date and time
      September 12, 2013, 10:49AM
    • Poor service and ludicrous prices is the problem. I only ever shop at Myer during sales when they can mysteriously drop prices by 40% and yet still make a profit... That is, of course, if I can get served. Maybe Mr Brookes could stop sponsoring racing events and put the money towards employing a decent number of staff. I have walked out of Myer on too many occasions to count after pointlessly waiting to be served. This has nothing to do with online retailing. He should do some mystery shopping in one of his stores and experience the service firsthand to understand the real problem.

      Commenter
      Oggly
      Date and time
      September 12, 2013, 10:51AM
    • Those penalty rates is partly why things are so damn expensive here!

      It's funny isn't it, people want a 7 day economy but arne't prepared to work in a 7 day economy

      Commenter
      Ailie
      Date and time
      September 12, 2013, 10:52AM
    • Spot on @Julian. Going into the city store over the last year is an experience in self-service. I feel for the under-supported staff.

      Commenter
      Zeljko
      Location
      Melbourne
      Date and time
      September 12, 2013, 10:52AM

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