Myer investors have punished the department store and pushed its share price to an all-time low after analysts downgraded the stock following its weak full-year results.
The company on Thursday revealed its full-year profit slumped 80 per cent to $11.9 million in 2017, driven by a $38.8 million writedown to the value of fashion brand sass & bide and a $6.8 million loss from its investment in Topshop’s local franchisee, which went into administration in May.
Myer closing more stores after weak results
Department store Myer’s net profit has tumbled 80 per cent in 2017.
Myer also said its “New Myer” turnaround plan revealed two years ago was taking longer than expected, with average sales growth of 0.1 per cent falling well short of its target of 3 per cent.
Shares were largely unchanged on Thursday but fell 4.1 per cent to 70¢ on Friday – their lowest point since the company listed on the ASX with much fanfare at $4.10 a share in 2009 – as analysts picked over the numbers.
UBS analyst Ben Gilbert cut his forecast for Myer’s earnings per share by 6 to 7 per cent for 2018, after the company said trading in the first six weeks of the financial year had been “below expectations”.
“The only positive from the result, in our view, was cash flow, with cash conversion of 102 per cent and inventory well managed,” said Mr Gilbert, whose price target was unchanged at 65¢.
Credit Suisse analyst Grant Saligari cut his valuation from 72¢ to 67¢, based on a lower earnings due to falling profit margins, and downgraded his rating from neutral to underperform.
“The last couple of years show how challenging it is to achieve the sort of sales metrics they originally discussed in the New Myer strategy, so that requires a rethink,” Mr Saligari said.
Myer investors pushed its share price to an all-time low. Photo: Wayne Taylor
“The company has probably done a good job at accelerating its cost-out and store closures, but it really needs to come up with an answer to the sales growth question.”
The company will hold a strategy day on November 1 to update the market on how it plans to compete in a retail marketplace that is facing disruption from international competitors like H&M and Zara and is bracing for the arrival of Amazon.
Myer shares have fallen 49 per cent since January, after it issued a shock earnings downgrade in July.
On Thursday Myer reported an underlying net profit of $67.9 million – in the middle of its revised guidance of between $66 million and $70 million.