Company declares profit after tax of $24.5m but says between 5% and 10% of its total floor area is under review

This article is more than 1 year old

This article is more than 1 year old

Myer says it will continue to cut floors and stores from its network amid falling sales at the retail empire.

Sales at Myer fell 3.5% over the past year to less than $3bn, amid what has been described as a retail recession driven by stagnant wages growth and high levels of household debt.

Myer’s sales figures were also hurt by its decision in March to stop selling “unprofitable” Apple products.

It said between 5% and 10% of its total floor area was under review, with areas to be given up including a level of its Melbourne store that currently sells toys and menswear.

But the chief executive, John King, said he did not expect the store closures to further reduce Myer’s sales.

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“We’re looking for flat sales, if not improved sales,” he told investors and analysts on Thursday.

He played down concerns Australia’s economy was going to fall into recession following the release of GDP figures on Wednesday that were the worst in a decade.

“I certainly wouldn’t use the R-word in terms of what we think of the economy,” he said.

Despite the fall in sales the company swung back into the black in the year to the end of July, declaring a profit after tax of $24.5m.

In the previous year, it declared a loss of $486m after taking a $540m hit from slashing store numbers and sacking staff.

The company is pinning its hopes on an influx of new brands after ditching Apple and losing fashion label Country Road, and has hired the Gold Logie-winning actor Asher Keddie as its new face.

Myer’s poor performance has been heavily criticised by its biggest individual shareholder, retail mogul Solomon Lew, who has previously blasted the company’s board as “clueless”.

Shareholder unhappiness has boiled over into a class action lawsuit over its 2014 results, which is awaiting judgment in the federal court.

The company is also under pressure from its bankers to further reduce a debt pile left behind by an ill-fated stint in the hands of private equity group TPG that ended a decade ago.

When TPG sold Myer to stock market investors in 2009, collecting about $1.4bn, it left the company about $420m in debt.

The company reduced this to $150m in 2018 and to $86m last year and plans to reduce this further under a new deal with its bankers that will reduce the maximum amount it can borrow over coming years.

The TPG era also left Myer paying large rent bills to its landlords after the private equity sold off its property portfolio and leased back the stores.

“We are in deep discussions with many of our landlords about changes to our lease arrangements,” Myer chief financial officer Nigel Chadwick said.

Myer said it had reduced executive pay after a shareholder rebellion at last year’s annual meeting delivered a second “strike” against its remuneration report.

But the company defended King’s $1.8m pay packet, saying it was the same as that of the previous chief executive, Richard Umbers, and the company was “competing for talent in a very small pool of international candidates”.

News of the profit turnaround drove Myer shares up almost 11% on Thursday morning.

But at 63.2c, the price is still well short of the $4.10 paid by any investor who bought in at the 2009 IPO.