The Myer Holdings Ltd (ASX: MYR) share price is down 13% after the department business released its FY20 result.
Myer’s FY20 report
Myer has been one of the retail businesses affected by COVID-19 impacts.
The company tried to make it easy for investors to compare the result to FY19 by reporting its pre-AASB 16 (lease accounting) numbers for the 52 weeks to 25 July 2020.
Total sales were down 15.8% to $2.52 billion which reflected widespread store closures. Comparable store sales were down 3.3% when excluding the period that stores were closed (in both the current year and the prior corresponding period) because of COVID-19.
However, whilst total sales were down online sales jumped 61.1% to $422.5 million.
The ‘operating gross profit’ margin decreased by 85 basis points (0.85%) to 38% but the cost of doing business decreased by $138.6 million (13.8%) to $863.8 million.
Overall, the company reported an underlying loss after tax of $11.3 million.
However, there were $159 million of implementation costs and individually significant items including impairments to brand names of $95.9 million and $37.1 million of lease right-of-use assets.
The pre-AASB 16 statutory net loss was $131.4 million and including AASB-16 the loss was $172.4 million. A painful year.
COVID-19 impacts
Myer said that all stores were closed for the majority of April and May, when approximately 10,000 team members were stood down. In the second half there was substantially reduced traffic to physical stores, particularly in CBD stores.
Management said they acted prudently with money management, swiftly cutting costs across all areas of the business to preserve cash.
However, Myer did successfully apply for jobkeeper. Of the $93 million received, a total of $41 million was paid to staff whose remuneration was lower than the required income threshold. Several other payment deferrals, as well as rent relief, were also negotiated.
In August 2020, Myer announced it had entered into a multi-year agreement with Australia Post to provide warehousing and online fulfilment services. Myer said this will underpin the next stage of online growth and it will also deliver significant savings.
Cash balance
Myer reported that its balance sheet position improved with inventory down 26% and net cash improving by $46.6 million to $7.9 million.
Outlook
Myer said that CBD stores will remain challenged for some time, but the geographical spread of stores in metropolitan and regional locations provides some insulation.
The department business said that the conditions should help the online segment become a billion dollar business quicker.
It’s going to continue working to try to serve customers whilst also lowering costs.
Myer is in a tough position. I’m not sure I would buy shares, even at this low price, unless Myer can significantly increase its online business and cut costs. Among retail ASX growth shares, City Chic Collective Ltd (ASX: CCX) is probably the one I’m drawn to most.
