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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.

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.

"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

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