Myer expects its annual profit to fall by up to 10 per cent in the current fiscal year as the department store operator endures the worst retailing environment in 30 years.
Myer reported a net profit of $159.7 million for the 12 months to July 30, 2011, compared to $67.2 million a year earlier.
The 2010 result was pulled back by $96.4 million in costs associated with Myer’s initial public offer (IPO).
Excluding the IPO costs in 2010 and $3.5 million in IPO costs in 2011, Myer’s operating profit for fiscal 2011 fell 0.2 per cent to $163.2 million.
Myer chief executive Bernie Brookes described the result as “solid” given a very challenging retail environment.
Unemployment was rising, interest rates were high, consumers were saving more, the strong Australian dollar had made shopping overseas attractive and consumer sentiment was weaker.
Furthermore, there had been the impacts of floods and cyclones and a high degree of political instability.
Myer’s sales revenue fell five per cent to $3.16 billion.
Myer said that, assuming trading conditions did not deteriorate further, sales were expected to be flat in fiscal 2012 and net profit to be up to 10 per cent below 2011.
“But our strategy is on track despite the worst conditions that I have seen in 30 years,” Mr Brookes said during a market briefing.
“It doesn’t matter what the pitch conditions are; we’re still comfortable that we can bat well.”
Mr Brookes said Myer was well positioned for growth once broader economic conditions improved and consumers started spending again.
He said Myer was building its internet sales and other digital platforms to complement its “bricks and mortar” operations and investing more in improving customer service.
City Index chief market analyst Peter Esho said Myer’s result was largely in line with expectations, but the outlook for 2012 earnings was disappointing.
“When digging under the bonnet, sales continue to decline and earnings are largely driven by cost management – a strategy which is not sustainable over the medium to long term in retail,” Mr Esho said.
Mr Brookes said Myer would continue to open new stores – including in Mackay and Townsville – and refurbish others. It also would spend less on promotions and more on customer service.
Mr Brookes said that in the 2011 fiscal year, the first half had been significantly affected by natural disasters. The second half had been affected by another global financial crisis and political uncertainty, he said.
“The consumer continues to be reluctant to spend,” he said.
Myer said its sales result included $14.1 million in sales from women’s fashion brand, sass & bide, since Myer acquired 65 per cent ownership of the brand in March.
Overall sales were reduced by $32.4 million as the company stopped selling whitegoods and reduced its offerings in music and DVDs.
Sales were also affected by price declines in categories such as flat-screen televisions.
But gross profit margins lifted on the back of increased profitability from exclusive brands, reduced shrinkage, improved sourcing, and better promotional strategy and product mix.
The strong Australian dollar also boosted margins.
Myer shares gained four cents to $2.10, as the rest of the market rose.
