Myer’s profit up as ASX retail stocks stage Covid comeback
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Despite various ongoing restrictions caused by Covid-19, department store Myer (ASX:MYR) has joined a cohort of ASX retail stocks not doing too badly in the first half of 2021.
The company reported a statutory net profit after tax of $43 million, up by 76 per cent from the previous corresponding period (pcp).
Bottom line NPAT was $42.9 million, on the back of $1.4 billion in sales which were down 13.1 per cent on pcp.
Online sales, as expected, performed strongly – up by 71% to $287.6 million and now represent almost 21 per cent of total sales.
Myer said the cost reduction restructuring it started last year has now borne fruit, with operating costs down by 20.9 per cent to $325.2 million.
The business was helped by $51 million in Jobkeeper payments in August and September of 2020. However, dividends remain suspended.
“We have now delivered five consecutive halves of reduced operating costs which, combined with a significantly improved balance sheet, has ensured the company was able to withstand this challenging operating environment,” commented Myer CEO John King,
In late March 2020, the company announced the closure of all stores for an initial period of four weeks, which resulted in the redundancy of 10,000 employees across its store network. For the next two months, the company was only selling online, and offered incentives to customers by reducing the threshold for free delivery to $49 per order.
Physical stores were opened over the next two months on a gradual and trial basis, and by 30 May 2020, the company was fully operational again.
The temporary lockdown was enough to wreak havoc on its financials, with the full year FY20 swinging to a net loss after tax of $11.3 million.
The company was forced to renegotiate deals with landlords, and sought a moratorium with existing lenders to extend the bank facility until August 2022. An new amended facility of $340 million was signed, with lenders agreeing that no covenant testing will be required at the end of FY20.
Myers has a 120-year history, with the first store being opened in Bendigo, Victoria in 1900 by Russian migrant Sidney Myer.
The business continued to flourish, and gradually became Australia’s largest department store by revenue and store count. It currently has 60 stores nationally, and competes with Woolworths (ASX:WOW) owned David Jones stores, amongst others.
The Myer share price was trading as high as $3.47 back in 2009, but encroaching competition especially from online operators has been weighing on the business. The share price is now at a fraction of its 2009 high, trading at 30c today.
The company’s troubles prompted chairman Garry Hounsell to resign from his role back in October. The resignation was pushed by its major shareholder, ASX listed Premier Investments Limited (ASX: PMV), in the few months prior. The search for a new chairman is currently still ongoing.
Not all is gloomy however for the retail sector. According to the latest Stockhead IPO watch, almost all retail debutantes in the last 12 months are above their IPO price.