Retail analysts are concerned about the current and future state of Myer, as the retail chain reveals its poor start to the Christmas shopping season.
Last week Myer warned that its 5 percent fall in the first two weeks of December trading (compared to the same period last year) would lead to a “material” decline in its first half-year earnings result.
“Trading during the past two weeks has been significantly below our expectations and the year to date run rate, and while there is an additional weekend of pre-Christmas trading this month, we do not know what the sales impact of that will be,” said Myer’s chief executive, Richard Umbers.
This advice sent Myer shares plummeting 11 percent to a record low of 65.5 cents, its lowest since the company floated at $4.10 in 2009, which saw the company valuation fall to $550 million
Myer’s total sales in November were down 2.3 percent and down 1.8 percent on a comparable store sales basis and its depressed December figures so far have come despite its heavy investment in marketing and traffic-driving initiatives.
In line with Christmas retail predictions from analysts that online retail will be the biggest winners this holiday shopping season, Umbers confirmed that its online business performed well.
“There has been continued strong performance in our online business with sales up 62% in the first four months despite cycling a particularly strong previous corresponding period in the lead up to Christmas 2016. While this strong growth has not been sufficient to offset the subdued trading in some stores, we take confidence from this performance as indicating that we are investing in the right areas,” said Umbers.
The challenging results come following months pressure from Myers’ biggest shareholder, Solomon Lew’s Premier Investments, which has been vocal about its criticism and concerns about Myer’s management and strategy. Following Thursday’s announcement, Lew has been unusually quiet.
While Myer’s balance sheet is still unharmed, analysts say that it is now a step closer towards defaulting on debt covenants, according to AFR.
At the Company’s AGM on 24th November 2017, Myer indicated that trading at the start of the all-important second quarter had shown no improvement in the first quarter.
“Since the AGM sales have continued to be below expectations and reflect ongoing challenging retail conditions characterised by reduced foot traffic, widespread industry discounting and subdued consumer sentiment,” the company said in an ASX statement last week.