Myer sees gloomy shoppers as a challenge after posting a disappointing flat first quarter result and losing womenswear sales.
But the department store’s chief executive Bernie Brookes insists Myer can capitalise on the busy Christmas sales period, despite a key economic indicator showing consumers are at their most pessimistic since the global financial crisis.
“The consumers’ ability to spend their discretionary income with us has been a challenge for quite a few years,” he told reporters on Wednesday.
The retailer’s total sales rose by just 0.1 per cent for the 13 weeks to October 25, compared with the same period in 2013.
The $691.6 million result was well shy of market analysts’ expectations of a 2.5-3.0 per cent increase, sparking a sharp drop in Myer’s share price.
“They are a big disappointment. That’s the only polite way of saying it,” IG market strategist Evan Lucas said.
Womenswear, which comprises about a fifth of Myer’s sales, faltered with Mr Brookes blaming foreign competition and marketing.
“We’ve had four-and-a-half years of womenswear being one of our two or three best performing categories so, therefore, a quarter where it’s performed a little disappointing is not a great concern for us,” he said.
Mr Lucas said womenswear was Myer’s bread and butter.
“The fact that it is underperforming would be a major concern for them,” he said, adding the department store could be losing customers to online and specialty stores.
Mr Brookes said rising living costs were more likely to dent the earnings of Myer and its rivals in poorer suburbs, as the latest Westpac-Melbourne Institute barometer of consumer sentiment showed pessimists outnumbering optimists in October for the longest time since the GFC.
But Mr Lucas said Myer was performing even worse than rival David Jones did before South African retail giant Woolworths Holdings took it over, adding Myer’s falling share price made it an attractive prospective for a private equity buyer.
“People are now running out of belief that the turnaround sales are there,” he said.
During the past year, Myer has closed stores in at Elizabeth, in northern Adelaide, and Dandenong in outer Melbourne.
But its refurbished Adelaide city store has made South Australia a top-performing state.
Myer has also recently re-opened stores at Indooroopilly, in Brisbane, and in Sydney’s Macquarie Centre.
It also has opened a new store at Mount Gravatt, also in Brisbane.
Myer shares fell 14 cents, or 7.4 per cent, to a two-year low of $1.76.
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* Comparable store first quarter sales up 0.7pct
* Cosmetics, toys, childrenswear and menswear were the strongest sales performers
* Lego, Nike, R.M. Williams and Trent Nathan sales highlighted