Myer Holdings Ltd (ASX: MYR) shares are crashing on Wednesday morning.
At the time of writing, the department store operator's shares are down 10% to 68 cents.
This follows the release of the company's half year results before the market open.
Myer shares crash on results day
For the 26 weeks ending 25 January 2025, Myer delivered modest sales growth despite operational challenges.
According to the release, total sales rose 0.1% to $1,830.9 million for the period, with group comparable sales increasing 0.8%. This reflects the closures of the Brisbane and Werribee stores, as well as ten standalone sass & bide stores.
Unfortunately, the ASX retail stock faced margin pressures during the half. Operating gross profit (OGP) declined 1.4% to $656 million for the half, with the OGP margin slipping 53 basis points to 35.8%.
Management advised that this was due to a sales mix shift towards concessions, heightened promotional activity, and additional distribution costs related to complications at its new National Distribution Centre (NDC).
Myer estimates that ongoing NDC complications reduced EBIT by $12 million during the period, with issues such as Myer Exclusive Brand (MEB) stock unavailability, dual site costs, and increased online fulfilment costs all weighing on performance.
Meanwhile, the cost of doing business (CODB) rose 1.9% to $457.8 million, impacted by inflationary cost pressures, higher employee costs from enterprise bargaining agreements (EBA), and superannuation changes.
This ultimately led to Myer reporting an underlying net profit after tax (NPAT) of $42.4 million (down 18.5%), while statutory NPAT was $30.4 million after factoring in $14.1 million in implementation costs and significant items. This is primarily due to transaction costs from the Apparel Brands acquisition and strategic review costs.
Despite the operational setbacks, Myer has declared a fully franked dividend of 2.5 cents per share.
Management commentary
Commenting on the half, Myer's executive chair, Olivia Wirth, said:
We have been focused on resetting the business and positioning the Myer Group as a retail powerhouse. We have concluded our strategic review and started to implement our Myer Group Growth Strategy with the acquisition of Apparel Brands, established our new leadership team and capabilities, arranged refinancing and commenced a restructure of sass & bide, Marcs and David Lawrence.
Despite challenging trading conditions in a tough macro environment and complications experienced at our National Distribution Centre, Myer traded well throughout the all-important Black Friday and Christmas trading periods. While consumers remain cautious, we reported growth in our comparable and online sales and I'm pleased to report our MYER one loyalty program delivered a record performance with 4.6 million active members and a 79% tag rate. In a year of transition, we remain focused on executing our strategic plans to drive growth and attractive shareholder returns.
Outlook
Trading conditions have remained challenging in the second half due to the tough macroeconomic environment for all consumers.
As a result, Myer Group sales for first five weeks of the second half are down 2.6% versus the prior corresponding period. It is also anticipated that the NDC challenges will continue to impact its financial performance.
