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Myer (ASX:MYR) share price sinks despite HY21 76% profit growth

The Myer Holdings Ltd (ASX: MYR) share price is down 10% after reporting its HY21 result, which included profit growth.

What did Myer report?

The department store business reported that total sales were down 13.1% to $1.4 million in the 26 weeks to 23 January 2021, reflecting store closures and reduced foot traffic, particularly in the large CBD stores across Melbourne, Sydney and Brisbane.

Comparable store sales were down 3.1%, but they were actually up 6.3% excluding the six CBD stores. Comparable store sales in CBD locations were down 32%.

The major highlight in terms of sales was the online sales that grew 71% to $287.6 million, representing 21% of total sales and one of the largest. It boasted that it’s one of the fastest growing online retailers in Australia.

The operating gross profit margin declined by 55 basis points (0.55%) to 38.6%, partly due to lower margin sales in apparel categories.

However, thanks to jobkeeper and rent waivers, as well as a focus on costs, the cost of doing business decreased by 20.9% to $325.2 million. It received $51 million of jobkeeper payments in August and September, which were paid to employees. The rent and outgoing waivers amounted to $18 million

Myer reported that its EBITDA (EBITDA explained) fell by 1.7% to $214.6 million, though was flat on a pre-AASB 16 basis (which is about accounting lease changes). EBIT actually increased by 2.7%, with the EBIT margin improving by 120 basis points (1.20%) to 7.8%.

Underlying net profit grew 8.4% to $42.9 million whilst statutory net profit went up by 76.3% to $43 million.

On the balance sheet side of things, Myer said that its net cash improved by $98.2 million to $201.1 million whilst inventory declined by 22% at the end of the period.

There was no dividend.

Myer CEO and Managing Director John King commentary

Mr King said: “The first half result reflects several positive achievements including the continued strength of our online business, now representing 21% of total sales, as well as sustained disciplined management of costs, cash and inventory. We have no delivered give 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.”

Summary thoughts

It’s good to see that Myer is continuing to generate a profit. An improved profit. I think what’s most impressive is the level of online growth. The fact that it made $287.6 million of online sales is very promising.

If it can shift more and more of its business online, then it could generate higher EBIT margins and go through an extended recovery. If online sales keep growing like that then Myer could be a ‘value’ idea to watch and think about. Of course, the retail industry is a very tough space and the department stores are likely to continue to face difficulties, so the rest of the business needs to be taken into account.

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At the time of publishing, the author of this article does not have a financial or commercial interest in any of the companies mentioned.

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