Retail player, TRS continues to face headwinds - reports a 40 percent drop in NPAT

In that backdrop, the H1FY19 results call for attention.

The company yesterday (20 February) announced its H1 FY19 results and luckily for the shareholders, there was no Deja vu moment this time around, the stock closed down by 1.1 percentage on 20th February 2019. Today (21 February 2019), the stock closed the session at A$2.700, down by 0.74%.

The company has reportedly met its H1 FY19 guidance.

Quick Look at the numbers:

• H1 2019 sales down by 1.1% on prior corresponding period (pcp) to $432.7m
• H1 2019 comparable store sales down by 2.6% on prior year (Q1: -1.8%; Q2: - 3.2%)
• H1 2019 EBITDA of $25.2 million (down 28.7% on pcp)
• H1 2019 NPAT of $10.6 million, a decrease of 40.4% on pcp (in line with October 2018 Guidance: $10.0m-$11.0m)
• Strong balance sheet position; good headroom on key Debt Covenants
• An interim fully franked dividend of 10.0 cents per share (H1 2018: 24.0 cps)

The Chairman of TRS Mr. Bill Stevens announced the result and stated that comparable sales were negative 2.6 percentage for the first half of FY19 and acknowledged that the months of September, October and November were tough trading months. However, December comparable sales were good with a growth of 0.2 %, thanks to Christmas special offers and branding activities.

The pressure was seen primarily due to negative customer numbers and fall in basket size, driven by selling price. The company reported that it had net ten new openings and one relocation during the half, adding to a total of 361 stores.

The directors declared an interim dividend which is fully franked, and the record date for the same is 18th March 2019. The Chairman stated that the dividend pay-out ratio will remain at a minimum of 60% level for FY19.

Commenting on the operating performance, the managing director Mr. Ross Sudano highlighted that H1 was extremely challenging period and the entire retail sector felt the impact of macro factors like low consumer confidence, flat wages, changing spending pattern and rise in the cost of energy. Also, the MD discussed the plans drawn upon to overcome the challenges. The change proposal includes:

• Rage selection with minimum duplication.
• Improved layouts.
• Store level execution and planning and many other initiatives.

The management also explained that it intends to make TRS category stand among the leaders for cards in Australia, driven through volume growth and a trial for the card category is already in progress. To improve the product differentiation, the company has developed exclusive ranges of products and one of the products from this initiative is under the brand Bees Knees. The company claims that the product has been well received.

The outlook for the future:

Company saw good traction in the month of December, despite that the management wants guides to deliver second half FY 19 net loss in between $6.5 million to $7.5 million, assuming comparable sales to be around -2% and -3 %, translating to full year NPAT guidance in the range $3.1 million to $4.1 million.

Stock performance: