The Myer Holdings Ltd (ASX: MYR) share price is taking a beating on Tuesday.
In morning trade, the department store operator's shares are down over 12% to 62 cents.
Why is the Myer share price crashing?
Investors have been hitting the sell button this morning after the company released a trading update that revealed a significant deterioration in its performance during the second half of FY 2023.
According to the release, Myer expects to report the following for FY 2023:
- Total sales up 12.5% on FY 2022 to $3,362.9 million
- Online sales down 4.5% to $690.5 million
- Net profit after tax up 15% to 21% to between $69 million and $73 million
While on paper this looks like a strong result in the current economic environment, it really is a tale of two halves.
The release reveals that Myer's second-half sales grew only 0.4% over the prior corresponding period.
But even worse, it only generated profit after tax of between $4 million and $8 million from those sales for the half.
Based on the low end of its estimates, this means that approximately 94% of its profits were generated during the first half. This points to an alarming decline in its margins during the second half, which may not bode well for FY 2024.
Management has blamed its weaker second-half profits on "headwinds generated from the macroeconomic environment affecting sales, margin and Costs of Doing Business."
Nevertheless, Myer's outgoing CEO, John King, was pleased with the company's overall performance in FY 2023. He said:
Myer's Customer First Plan has continued to deliver both positive sales growth and positive profit growth in FY23, despite the prevailing macroeconomic headwinds that have buffeted the retail sector throughout the second half. We continue to tightly manage costs, inventory and cash to ensure we have a strong balance sheet as we begin FY24 where we expect the ongoing uncertainty around the macroeconomic environment to persist.
One positive is that the Myer share price remains up over 25% since this time last year despite today's decline.
