Shares of Myer Holdings Ltd (ASX: MYR) will be in focus today after the Australian department store operator released its half-year results to the market.
For the 26-week period ended 23 January 2016, Myer reported revenue growth of 1.8% to $1,794.8 million and a net profit after tax of $59.7 million, down 4% on the prior corresponding period.
The company said its 'New Myer' initiative, which in part is focused on bringing popular brands in store is proceeding well, despite only recently launching the strategy.
"Our first wave of initiatives to deliver wanted brands, enhanced customer service and an improved omni-channel experience have helped deliver comparable store sales growth of 7.1 percent across 12 Victorian and New South Wales Flagship and Premium stores," Myer CEO Richard Umbers said. "We have a significant pipeline of further improvements and the team has a strong focus on execution."
Moreover, the company's online presence is growing quickly, although from a small base, with revenue increasing 70% during the period. The company also launched an eBay store.
Reflecting on its financial performance, Myer said the negative effects of a falling Australian dollar were mitigated by a focus on product, price and markdown efficiencies. The cost of doing business (COBD) improved 1.35%, and lower interest charges reflected the company's lower debt profile.
Despite a rise in cash flow, the company's interim dividend fell to two cents per share fully franked, down from last year's 7 cents per share fully franked.
Myer's board also lowered the dividend payout ratio range to between 50% and 80% of annual net profit, from the previously less flexible 70% to 80% of annual net profit. The company said its renewed payout guidance is reflective of its focus on strategic initiatives.
Looking ahead, Myer will accelerate the rollout of 'New Myer' initiatives. The company expects full-year profit to be in the range of $66 million to $72 million, excluding impacts of implementation costs associated with the 'New Myer' strategy – expected to be between $20 million and $30 million.
Foolish takeaway
Myer has a disappointing track record since it re-listed on the sharemarket in 2009, with shares down 71%. A new strategy, with a shoring up of its balance sheet, is clearly what Myer needs. However, investors must carefully scrutinise management's initiatives and progress to ensure the 'New Myer' strategy is not smoke and mirrors.
Personally, I think the move to popular brands is important to Myer's longevity because it can no longer compete on home brand clothing with the likes of Kmart and Target owned by Wesfarmers Ltd (ASX: WES), or Woolworths Limited's (ASX: WOW) Big W.
