Myer (ASX: MYR) Share Price Drops 11% Following Weak FY24 Results

The Myer Holdings Ltd (ASX:MYR) share price has dropped by 11% following the release of its FY24 financial results. As one of Australia's largest department store retailers, the company's recent performance has garnered attention, with the results reflecting a challenging retail environment. 

For the 52 weeks ending 27 July 2024, Myer reported several key financial metrics. Total sales declined by 2.9% to $3.27 billion, while online sales saw a modest increase of 2%, reaching $704 million. Despite growth in the online segment, the company’s operating gross profit decreased by 2.5%, settling at $1.19 billion. The underlying net profit after tax (NPAT) experienced a sharp decline of 26%, amounting to $52.6 million. Meanwhile, statutory NPAT came in lower, at $43.5 million. 

Myer also announced a final dividend of 0.5 cents per share, with the full-year dividend amounting to 3.5 cents per share. These figures highlight a significant decrease in profitability, prompting the company to reflect on several contributing factors. 

According to the company, the decline in sales was largely due to the closure of three stores—Brisbane, Frankston, and Werribee—for part or all of the financial year. Myer also cited difficult economic conditions as a reason for the drop. However, when adjusting for the impact of store closures, comparable group sales still managed to grow by 0.4%, showing that the company's core business maintained a degree of resilience in an otherwise tough retail landscape. 

The company’s cost of doing business (CODB) increased by 1.3% to $834.7 million. This rise is attributed to the operational costs related to mitigating store closures. When excluding the reclassification of delivery income, Myer noted that the CODB remained relatively flat. These financial pressures were compounded by other challenges, such as higher costs and the underperformance of specific brands, including sass & bide, Marcs, and David Lawrence. The company pointed to these factors as contributing to the drop in underlying NPAT, which has been a major point of concern. 

In terms of statutory net profit, Myer included $9.1 million in costs related to significant items, including the impairment of store assets and software implementation costs. These additional expenses impacted the overall profitability of the business for FY24. 

Myer's Executive Chair, Olivia Wirth, commented on the result, acknowledging the difficulties faced by Australian retailers in the current macroeconomic climate. She emphasized that while trading conditions have been challenging, Myer has taken steps in recent years to stabilize the business. According to Wirth, the retailer has built a strong foundation for future growth through several key initiatives, including a highly engaged customer base, a successful loyalty program, and positive comparable sales growth within the department store segment. 

Looking ahead, Myer has initiated a strategic review to further enhance profitability and drive sustainable earnings growth. The review aims to identify opportunities to strengthen Myer’s market position and generate both strategic and financial benefits. 

One area of focus is a potential merger or combination with Premier Investments Limited’s (ASX:PMV) apparel brands. Talks between the two companies are ongoing, and due diligence is being conducted. According to Myer, a successful combination could enhance the company’s scale and revenue while delivering cost synergies and leveraging its loyalty program across a larger customer base. Additionally, the potential merger could allow Myer to expand its exclusive and private label offerings. 

The company has also ceased its sale process of sass & bide, Marcs, and David Lawrence, opting instead to reset the sass & bide brand to improve its performance. This will include the closure of 10 sass & bide retail stores in the first half of FY25 as part of a broader restructuring effort. 

In early FY25, Myer reported that comparable department store sales had grown by 0.2% year on year in the first seven weeks. However, it remains to be seen whether the company can regain its former standing in the highly competitive and rapidly evolving retail landscape. 

While Myer continues to face hurdles, its ongoing efforts to stabilize the business and identify growth opportunities provide a glimpse of potential in the future. However, much will depend on how well the company navigates the current economic environment and whether the potential merger with Premier Investments materializes into a significant strategic advantage.