By Eli Greenblat
Department store owner Myer has declined to raise its full-year earnings guidance, despite a better-than-expected first-half performance, giving it more flexibility to invest in its business in coming months or offer better prices to customers, while still hitting prospectus targets.
Myer chief executive Bernie Brookes said earnings before interest and tax (EBIT) for the first half were expected to increase by more than 10 per cent over the corresponding period last year, and be in excess of the prospectus guidance of EBIT growth of 5.6 per cent.
Myer shares had their worst day since their first day of trading on November 2, losing 13 cents, or 3.9 per cent, to end at $3.25. Rival department store chain, David Jones, also sank, with its shares closing down 20 cents, or 4.1 per cent, to $4.73.
He said a decision was made against also upgrading the full-year earnings targets despite the good start to the year so Myer could use the buffer to drive top-line sales or invest in its operations.
''We want to be able to ensure that we can drive the second half of the year from a sales point of view and you can see that we are in front of the run-rate so we've got that in our pocket and we may well decide to bank that at the end of the year or we might decide to invest it to drive top line sales,'' Mr Brookes said.
Myer this morning announced it had increased its first-half sales by 2 per cent despite a disappointing Christmas period.
Sales for the first half of fiscal 2010, to 23 January, were $1.797 billion. Myer said it was on track to achieve its pro forma full- year prospectus EBIT guidance of $261 million for fiscal 2010.Sales revenue for the second quarter of fiscal 2010 had been flat on the previous corresponding period, following sales growth in the first quarter of 5.2 per cent.
The retailer said like-for-like sales were strong in November and January, but they had been "negative" in December, reflecting both the "very challenging" pre-Christmas trading environment in which consumers delayed purchases in anticipation of the post-Christmas sale period, and the anniversary of the first federal government stimulus package.
Myer's experience was echoed in part in today's retail sales figures for December, which showed an overall drop of 0.7 per cent for the month.
"The period leading up to Christmas 2009 was characterised by earlier and deeper discounting in the retail sector than has been evident for many years," Mr Brookes said.
He said all categories performed above last year, except for electrical, which benefited from last year's Government stimulus.
Mr Brookes said it electrical sales - which account for 15 per cent of total sales - were stripped out then the department store would have recorded positive sales figures for December.
Myer’s new store opening and refurbishment program, including the rebuild of Myer Melbourne and the development of new full-size stores in Top Ryde in NSW and Robina in Queensland are on track and progressing well, Mr Brookes said.
The strongest performing states were Victoria, NSW, South Australia, the ACT, and Tasmania.
All categories performed above last year, except for electrical, which benefited from last year’s Government stimulus, Myer said.
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