In morning trade the Myer Holdings Ltd (ASX: MYR) share price has pushed higher following the release of its results for the six months ended January 28.
At the time of writing the department store operator's shares are up 6% to 45.5 cents.
Here are key takeaways from its half-year results release:
- Total sales fell 3.6% on the prior corresponding period to $1,719 million.
- Comparable store sales were down 3% during the period.
- Online sales grew 48.9% during the first-half.
- Net profit after tax pre-implementation costs and individually significant items decreased by 36.1% to $40.1 million, equating to EPS of 4.9 cents.
- A non-cash impairment charge relating to Myer goodwill and brand name of $515.3 million and other asset impairments of $9.2 million (both pre-tax).
- Implementation costs associated with the Strategy of $13.7 million pre-tax.
- First-half statutory net loss after tax of $476.2 million.
- No interim dividend.
- Outlook: CEO search ongoing and sales have improved in the second-half but week-to-week volatility remains.
Whilst this result clearly was a bit of disaster, I was pleased to see that things haven't deteriorated further since its last update. Because of this, I can't say I'm overly surprised to see its share price trade higher in morning trade.
Management has blamed the poor result on a particularly weak January resulting from a significant drop in retail foot traffic. According to the ShopperTrak retail traffic index, foot traffic was down 10.7% in January 2018 compared to the prior corresponding period.
Although it will be disappointing for investors that have held onto their shares, it shouldn't come as a huge surprise to see that Myer has suspended its dividend. I think this was a necessary step and will allow the company to reinvest its underlying profits back into the business.
One bright spot, however, was the performance of Myer's online business. Online sales grew 48.9% on the prior corresponding period to $105.2 million.
As a user of its online store I can attest to its quality. But it is still only early days and accounts for just 6.1% of its overall sales. I can't help but feel that its online strategy came five years too late.
Should you invest?
Based on today's underlying result, Myer's shares are changing hands at 8x earnings at present. While this is clearly cheap, the structural issues the company is facing could ultimately make this a value trap.
In light of this, I would sooner buy retail shares such as Premier Investments Limited (ASX: PMV) and Lovisa Holdings Ltd (ASX: LOV) instead.
