Shares in Myer Holdings Ltd (ASX: MYR) are flat in early trade after the department store operator revealed its results for the full year ending June 30 2016. Below is a summary of the headline numbers.
- Statutory net profit after tax of $60.5 million, more than double last year's $30.7 million that took $47.7 million in transformation costs
- Underlying profit of $69.3 million, before transformation costs of $8.8 million
- On a comparable basis net profit pre-transformation costs was down 8.2% versus the $77.5 million in FY15
- Comparable same-store group sales up 3% for the full year
- Total sales up 2.9% to $3,289 million
- Operating gross profit margin down 1.64% reflecting increased discounting and strong concession sales
- Operating cash flow improved by $36 million
- Final dividend of 3 cents per share fully franked
- Net debt stood at $102 million (Gross debt of $147 million minus cash of $45 million)
- Basis earnings per share of 8.8 cents
After a year of heavy investments in FY15, Myer is starting to see some return on that investment with the highlight of the result being the 5.6% same-store sales growth in the group's flagship and premium stores in NSW and Victoria.
Another core metric to watch is the operating profit margins with Myer aiming to grow earnings faster than sales in FY17. It also flagged that the operating gross profit margin rate of decline slowed over the second half, thanks in part to the 'wanted brands' strategy.
The group's overarching strategy under its new CEO is to invest in store refurbishments and get fashion brands in store that are likely to attract more shoppers into the stores. Myer also confirmed it continues to realign its store footprint to focus on flagship stores and close underperforming stores mainly in regional Australia.
Outlook
Selling for $1.32 the group trades on 15x trailing earnings on a yield of 3.8%, with the company flagging accelerating capital investments in its priority stores. It also stated it anticipates a return to net profit growth, pre implementation costs. However, the retailer did not specify how much it expects to invest in FY17 and this will be weighing heavily on the minds of investors given the large capital outlays in FY15.
Myer remains a turnaround story that is yet to really start turning, which means bargain hunters need to be careful they are not buying a business in terminal decline. I expect the stock will remain volatile due to the large amount of short interest and it looks a story to watch from the sidelines.
