SYDNEY — Shares in Myer Holdings Ltd. plunged 10.1 percent in trading Thursday after the company downgraded its full-year earnings guidance and unveiled a 23.1 percent slide in first-half profits.
The shares ended the day at 1.38 Australian dollars, or $1.05.
Australia’s biggest department store chain said it expects to deliver full-year net profits of between 75 million and 80 million Australian dollars, or $57 million to $61 million, excluding one-off costs, down from 98.5 million, or $92.7 million at average exchange rates, posted for fiscal 2014. The market had been expecting a full-year profit of 89.6 million Australian dollars, or $68 million.
Myer reported that profit fell to 62.15 million Australian dollars, or $49.55 million at average exchange, for the six months ended Jan. 24, on sales of 1.76 billion Australian dollars, or $1.45 billion, up 1.5 percent on the previous year and 0.9 percent on a like-for-like basis.
Second-quarter sales were up 2.5 percent to 1.07 billion Australian dollars, or $855 million, up 1 percent on a like-for-like basis. January total sales were up 3.9 percent, boosted by “strong” growth in online business, Myer said.
Cosmetics was the top performing category in the first half with men’s wear, children’s wear, toys and entertainment singled out as strong performers, offsetting ongoing challenges in women’s wear.
Chief executive officer Richard Umbers, who took over from nine-year incumbent Bernie Brookes earlier this month, said that Myer’s yet-to-be-unveiled transformation strategy would hinge on customer-driven decision making, a transformation of merchandise ranges, greater focus on in-store theatre and an acceleration of omnichannel and the Myer One customer loyalty program.
“Some elements of the existing strategy represent solid retail fundamentals. However, overall it did not deliver a business model able to respond to this new retail environment and we have lost relevance with some customers,” he said.
In separate research notes published earlier in the week, both Credit Suisse and Citigroup analysts predicted Myer could reduce its 67-store network, with Citigroup analysts expecting up to seven stores to be cut.
“The speed with which he [Brookes] left, the inferred meaning was that this result was going to be terrible, which gave the incoming ceo room and scope to completely clear the decks,” said IG market strategist Evan Lucas. “When Umbers says that we’ve lost relevance, it’s very clear why. He will in the next six to eight weeks come out with his major strategy direction for Myer and it better be impressive for the market to start seeing Myer as relevant.”