By Ross Kelly
SYDNEY--One of Australia's largest and oldest department stores
acknowledged it was in need of a makeover after a 23% slump in
first-half profit sent its shares tumbling on Thursday.
Like many of its global peers, Myer Holdings Ltd. is struggling
to cope with a wave of competition from online sellers of consumer
goods, as well as the arrival in Australia of specialty retailers
such as Hennes & Mauritz AB and Inditex-owned Zara.
Australia's weak economy at the tail-end of a resources boom is
compounding the difficulties for traditional retailers such as Myer
by encouraging spendthrift consumers to search for bargains
elsewhere--often from websites based overseas.
"People are coming into Myer stores, trying something on, then
buying it online from someone else," said Brad King, a portfolio
manager at Melbourne-based Armytage Private. "And Myer's been slow
to the party in getting an online presence."
Myer posted net profit for the six months to Jan. 24 of 62.2
million Australian dollars (US$48.2 million). It warned of
shrinking margins and forecast a lackluster full-year result of
between A$75 million and A$80 million, excluding one-off
restructuring costs.
First-half revenue rose 1.5% after Christmas sales were buoyed
by low interest rates and falling gasoline prices. But costs of
doing business jumped 6.2%, as the company continued to build its
online presence, refurbished stores, and spent more on staff.
"Customers have changed the way they shop and their expectations
of retailers have changed significantly," Richard Umbers, Myer's
new chief executive, said Thursday. "Our new strategy...will be
guided by a clear vision and a plan to win back market share."
He added that Myer's international peers had responded to
globalization and digitization by beefing up their online presence,
improving the "in-store experience" and overhauling their product
range. He didn't provide specific details on how Myer intended to
change--pledging to update the market later in the year.
Investors were already wary of a disappointing result following
the resignations earlier this month of long-serving CEO Bernie
Brookes and the company's chief financial officer.
The Melbourne-based company, founded in 1900 by a Russian
migrant, has racked up a string of poor profit results since it was
relisted by its then private equity owners more than five years
ago. Its shares fell as much as 13% on Thursday and are down by
around two thirds since the initial public offering.
Citigroup this week said Myer may need to launch a A$300 million
equity raising to fund a transformation, and possibly close as many
as seven stores. Armytage Private's Mr. King said Myer needed also
to consider paying staff commissions to bring its sales culture
more into line with peers in the U.S. and Europe.
Write to Ross Kelly at ross.kelly@wsj.com
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