Myer 1H15 result down 23%

About the author:

Josephine (Jo) Little
Author name:
By Josephine (Jo) Little
Job title:
Senior Analyst
Date posted:
19 March 2015, 1:59 PM
Sectors Covered:
Consumer Discretionary, Industrials & Developers

Myer's (MYR) core NPAT for 1H15 was A$62.2m, down 23% on the previous-corresponding-period. 

Like-for-like sales rose by 1% in the second quarter. This appears ok, but when you factor in the uplift from refurbished stores, it implies plenty of the existing stores saw negative comp sales...a worrying trend.

MYR pointed to womenswear as the key challenge for the group. Gross margins fell (really should have been up on the pcp) due to promotional activity to stimulate sales (a worrying sign as this isn't really eventuating) and the lower AUD. 

The interim dividend of 7 cents per share represents a 67% payout ratio.

Outlook

Management has pointed to a very tough second half of the FY15. Full year guidance has been cut to $75-80m (excluding A$7m of one-off costs). This is around 13% below consensus.

View

Plenty of uncertainty and a strategic review is ongoing. The new CEO could well take aggressive action in the near-medium term to ensure the business can turn around longer term.

We continue to avoid this stock in spite of the seemingly 'cheap' valuation and relatively high debt.

Management changes are likely to see some significant restructuring, however the risk of further investment opex and potential for store closures (which would potentially cause another step-down in consensus earnings) means it is too early for us.

This business has little to no competitive advantage in a highly competitive market. Still an avoid here and highlight the potential risk to the dividend down the track.

More information

Morgans clients can access further detailed analysis on Myer. If you would like more information, please contact your nearest Morgans office

Disclaimer: The information contained in this report is provided to you by Morgans Financial Limited as general advice only, and is made without consideration of an individual's relevant personal circumstances. Morgans Financial Limited ABN 49 010 669 726, its related bodies corporate, directors and officers, employees, authorised representatives and agents (“Morgans”) do not accept any liability for any loss or damage arising from or in connection with any action taken or not taken on the basis of information contained in this report, or for any errors or omissions contained within. It is recommended that any persons who wish to act upon this report consult with their Morgans investment adviser before doing so.

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