Why the Myer share price crashed 12% on Thursday

Since its March 2020 lows, the Myer (ASX: MYR) share price has been on a hot streak: rising 255% as investors seemingly pile into any stock with an online or e-commerce spin.

While the iconic retailer did indeed report heady online growth as part of its just released (FY21) interim results, revenue and comparable store sales were both down and management said dividends would remain suspended.

It seems that impressive online sales growth couldn’t sate investors, with the stock down 12.12%, to $0.29 per share, a little after noon on Thursday.

Below we look at the highlights from the first-half results.

Results at a glance

Continuing a trend started in 2016, Myer saw its total first-half sales again decline, falling 13.1% to $1,398 million. This was attributed to store closures and weaker foot traffic as a result of the pandemic. Despite that explanation, it should be noted that the retailer’s full-year revenues have been in decline since FY16.

On a more granular level, with some of Myer's largest and most popular department stores suffering closures during the half, the retailer noted that comparable store sales had dropped 3.1%. Excluding the impact of Myer’s six key CBD stores however, comparable store sales were actually up 6.3%.

While overall revenues have continued to decline, the company did flag impressive growth across its online sales channels, reporting online sales of $287.6 million, implying a strong growth rate of 71%. Online sales now make up around 21% of total sales and Myer has described itself as one of Australia’s ‘leading digital retailers’.

In explaining this performance, it was noted that:

'The continued rapid growth reflects several factors including the extensive improvements to the website undertaken during the past three years, the widespread trust associated with the Myer bran and the improved fulfillment capacity and efficiency.’

Costs (cost of doing business) also fell sharply in the half, down 20.9%.

This focus on operational discipline has been a key priority for Myer’s CEO John King, with Mr King proudly saying:

'We have now delivered five consecutive halves of reduced operating costs which, combined with a significantly improved balance sheet, has ensured the company was able to withstand this challenging operating environment.'

Show me the money

Despite lower overall sales for the 26 weeks to 23 January 2021, Myer has seen its cash position dramatically improve and its net profits rise.

Net cash hit $201.1 million (+$98.2 million), while its inventory fell 22%. This inventory rundown was a reflection of 'merchandise cycle improvements, better stockturn and some product availability issues,’ the company said.

On the bottom-line, Myer saw both its earnings (EBIT) and profits (NPAT) improve, coming in at $109.0 million and $43.0 million, implying improvements of 2.7% and 76.3%, respectively.

Despite its cash position and stronger earnings, the Board said that its dividend would remain suspended. No commentary on when the company may resume dividend payments was given as part of the interim release. Myer last paid a dividend of 2.0 cents per share in late 2017.

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