Department store retailer, Myer Holdings (ASX: MYR) has surprised the market, revealing a slight rise in net profit and beating expectations.
The company reported a 0.7% rise in net profit to $88 million on the back of $1.7 billion in sales. Pleasingly, second quarter sales were up 2.1%, continuing the positive trend, which included the Christmas and Stocktake sales period. Myer has cut back on discount sales, exited whitegoods, gaming and consoles, music and DVDs, and the free space reallocated to higher margin fashion categories.
Menswear, cosmetics, womenswear, fashion accessories and childrenswear were the best performing categories, well ahead of last year in both sales and gross profit. Myer exclusive brands grew by 10% during the half and now represent close to 20% of all sales.
The company’s balance sheet has also strengthened, with net debt reducing by $56 million to $242 million, over the previous year, and underlying inventory improved by 6%, showing management’s strong focus on improved product sourcing and getting new products to market and out-the-door faster.
Myer’s loyalty program continues to grow, with more than five million members. Around 70% of Myer’s sales are to members. Online sales continue to grow strongly, and the company reports that it had more than eight million visits during the past six months. Myer declined to give guidance for the full year, saying it remained cautious about the trading environment, despite positives like low interest rates, improving consumer confidence and rising home prices and share markets.
For income focused investors, Myer declared an interim fully franked dividend of 10 cents.
This result continues the positive trend we have seen from discretionary retailers JB Hi-Fi Limited (ASX: JBH) and Harvey Norman Holdings (ASX: HVN), with improvements in sales, after a long period of disappointing performance. That should give other retailers, including David Jones Limited (ASX: DJS) some confidence going forward.
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