The decision by Myer boss Bernie Brookes to refuse to offer investors any sales, costs or earnings guidance for 2013 is a sign of the fragility of consumer confidence in Australian retail, and most specifically department stores.
Myer is one of many companies during the latest profit season that opted to skip earnings guidance for 2013 after so many got caught having to downgrade profit guidance warnings earlier this year.
In Myer's case its full-year net profit was down 14.3 per cent, which was marginally better than management guidance of 15 per cent but included an unexpected $16.2 million contribution from a write-back on its fixed lease rentals, which, if stripped out of the net profit after tax result, would have been outside of guidance. On the positive side, it finished the year with three months of improved like-for-like sales.
How much of the improvement in sales in the last three months was due to a change in strategy, including a reduction in the reliance on markdowns (which costs 10 per cent of turnover or $300 million), the implementation of its five point plan, or the federal government's carbon tax compensation package to families is difficult to ascertain, but it had some impact.
But the latest ABS figures for July show that retail was down 0.8 per cent with a massive 10.2 per cent fall in department store sales. The downturn in department store sales is mirrored in the various listed property trusts which have an exposure to shopping centres.
The big hit in department stores sales is in sharp contrast to online sales, which are going gangbusters, particularly international online sales, which jumped 29 per cent in June.
While Myer has embraced the online wagon, it has come on board somewhat belatedly, and it is hard to compete with international online shopping when a strong dollar, less tax and more product variety, makes the overseas sites a compelling offer.
The upshot is the board decided to avoid giving guidance.
“The outlook is uncertain due to a continued tough retailing environment and subdued consumer confidence. Therefore Myer does not intend to provide sales or profit guidance to the market for 2013,” he said in a statement.
Myer paid a fully franked dividend of 9 cents for the second half, which was less than Deutsche Bank's forecasts of 9.5 cents a share.
Myer is one of the most shorted stocks on the ASX, with more than 10 per cent of its issued capital reported as short sold. This automatically adds volatility to the stock. Indeed, six retail stocks rank in the top 15 most shorted stocks on the ASX due to the uncertainty in retail and weak consumer confidence.