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Myer Q1 sales set trend for Christmas period

Record low interest rates were always meant to have a positive impact on consumer spending and so far, so good. Myer (ASX: MYR) today released its first-quarter results, which showed a modest improvement on last year, up 0.44%.

For the first 13 weeks to October 26 2013, the company notched up an impressive $691.1 million in sales. The company said, “key categories of Cosmetics, Youth, Womanswear and Menswear were the strongest performers during the quarter.” During that time, however, three of the top 20 stores were undertaking a refurbishment and the company attributed a “significant impact” on sales because of the work.

Perhaps the most impressive figure for investors bearish on the company’s ability to compete with the internet was the doubling of its online store sales. CEO Bernie Brookes said, “We are pleased with this sales result which is in line with our expectations and give us early encouragement that we are well positioned to make the most of our busiest time of year during the Christmas and Stocktake trading period.”

However, despite the renewed optimism about the holiday season and a modestly improving trend in sales activity, the company believes trading “continues to be patchy.”

Myer’s results follow on from strong leads posted by David Jones (ASX: DJS) earlier this month. David Jones CEO Paul Zahra acknowledged the effect of the election as a “positive impact to our customers” but said there is still a large amount of uncertainty, with many consumers still cautious. Similarly, retail heavyweight Harvey Norman (ASX: HVN) said it has not seen a significant boost in consumer spending but is looking forward to the Christmas trading period.

Foolish takeaway

When interest rates drop there is always an amount of uncertainty that persists (otherwise they wouldn’t be dropping rates), but overall the impact of lowering the cash rate will have a positive effect upon consumer and business confidence, whether it’s this year or next.

In this Fool’s opinion, at current prices, investors could do worse than add Myer to their portfolio. It pays a great dividend and has what seems to be an exciting trading period ahead. This is likely to improve both top and bottom line growth.

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Motley Fool contributor Owen Raszkiewicz owns shares in Myer. 

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