Myer first-half profit falls 74% | Noosa Business | Business News for Noosa, Australia

AAP

MYER Holdings Ltd has downgraded its full year sales growth target to between one and two per cent, and indicated it expects a seven per cent rise in revenue in the following fiscal year.

The department store owner on Thursday reported a 74.4 per cent drop in statutory first half 2009/10 net profit mostly caused by the costs of floating the company last November.

Net profit fell to $21.3 million for the 26 weeks to January 23, from $83.2 million in the prior corresponding period, Melbourne-based Myer said in a statement on Thursday.

Profit before the costs of the initial public offer (IPO) were taken into account jumped 38 per cent to $114.8 million, as the company succeeded in lowering the costs of doing business.

Myer said it remained cautious about the outlook for the second half of its fiscal year as stimulus washes out of the economy and consumers remained wary with interest rate rises expected.

However, chief executive Bernie Brookes told reporters Myer would meet all fiscal 2009/10 metrics set out in its IPO prospectus except for sales growth, which would now be between one and two per cent for the year.

"We don't believe we'll achieve that three per cent (target)," he said on Thursday.

"We believe one to two per cent is prudent and good governance to be able to announce that."

February sales were muted on "an exceptional" January sales result, he said, adding that February sales were cycling some "very poor" sales in Victoria in February 2009 following the bushfires.

"Five weeks down the track, with the five weeks of sales being north of two per cent, we needed to get for the full second half over 4.5 per cent (sales growth )... to get our three per cent (sales growth) prospectus forecast," he said.

"February was in line with our expectations, north of two per cent, but it did not fulfil what we were achieving in January."

"If we had continued what we'd got in January through February and through March then we would be looking at north of three per cent (full year) sales growth.

"But there is a degree of comfort that we are back to the run rate we were getting sort of in November, before December hit."

February trading produced strong results in Victoria and Tasmania, good sales in South Australia and sales in Queensland "started to bounce back," he said.

Across product categories, sales of electronics remained problematic for Myer during February.

Lower sales of electronics goods marred Myer's Christmas 2009 sales performance.

Myer's cost cutting campaign during its 50-month turnaround phase has driven costs down to a sustainable level, but Mr Brookes said he believed there was still another one per cent of costs to extract from the business over the next few years.

This will be driven by increased volumes, efficiencies, back office wages and tenders.

Cost of doing business was 27.9 per cent of sales for the first half fiscal 2009/10.

"The current level of cost of doing business is not only sustainable but it provides us with enough to get the three per cent comp (comparable same store sales growth)," he said.

Asked about the impact on revenue growth in 2010/11, Mr Brookes indicated that the two new stores at Top Ryde, in Sydney, and Robina, in south-east Queensland, as well as the impact of the refurbishment of Myer's flagship Melbourne city store, would add four per cent to the company's revenue base.

He indicated Myer is expecting around seven per cent revenue growth in 2010/11.

"So ideally we've got a base of four...and if we're a good retailer we can get three per cent in comp sales (comparable same store sales growth)," he said.

"So I think you can sort of add those together and that will give you a good idea of where our mind is at."

Asked about former private equity owner Texas Pacific Group's (TPG) dispute with the Australian Tax Office (ATO) over tax due on the proceeds from the sale of its stake in Myer last October, Mr Brookes said it was an issue for TPG and the ATO.

"We have no understanding on the status there," he said.

Myer's shares were three cents lower at $3.44 at 1309 AEDT.