The post-GFC hangover plaguing Australia’s retail sector has been highlighted again today with Myer posting weaker-than-expected sales figures for the three months to April 24.
The department store giant, which listed on the Australian Stock Exchange last year, said like-for-like sales (which exclude the impact of new store openings) were up just 0.3% during the quarter to $671 million, well below analyst predictions of 0.8% growth.
But while Myer predicted that the fourth quarter would be “challenging until the full impact of the Government stimulus has passed”, it stuck with its previous profit forecasts for sales growth of 1% to 2% to between $3.29-$3.33 billion, and earnings before interest and tax growth of 10.7% to $261 million.
Myer chief executive Bernie Brookes described the result as “pleasing” given the fact that boost retailers received this time last year from Federal Government stimulus payments has now faded, and interest rates rises are weighing on consumers.
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“In anticipation of facing tough trading conditions in the third quarter, we pulled a number of levers to drive traffic and sales, including successfully utilising our MYER one loyalty program to engage our customers with relevant promotional offers,” Brookes said in a statement.
While Brookes didn’t specifically discuss discounting, it is clear that some of his sales-generating “levers” included prolonged discounting campaigns, with Myer and its great rival David Jones running almost constant sales and special offers since the start of the year to lure consumers in.
And while the company’s third-quarter sales update contained no information about Myer’s margins, most retailers believe Myer and David Jones’ margins would be under pressure due to discounting.
“David Jones and Mayer have driven their sales through strong discounting,” Target boss Laura Inman told the Australian Financial Review today.
“It has probably worked for them and I think their sales growth has been better than ours, but I would imagine that their margins are under pressure,” she said, admitting Target’s margins were also under pressure and other discount stores.
Investors were unimpressed with Myer’s sales data and the stock was down about 1% to $3.03 at 11:30 AEST.
The company’s shares remain well below the October 2009 float price of $4.10.