Myer Holdings (ASX: MYR) shares are down 14% on the back of the FY23 trading update. Business slowed considerably in the second half in the face of macroeconomic headwinds apparently. The online segment is doing well, stores are closing in response to that, the strategic part seems to be doing fine. It’s the day to day - or that general economic background - that seems to be the problem. But there’s one more thing that all too few take into account - inflation.
The results at Myer Holdings: “2H23 Total Sales2 up 0.4% on 2H22 despite deteriorating trading conditions during the half, and up 11.9% on 2H19; FY23 Full Year Total Sales2 up 12.5% on FY22 to $3,362.9 million, and up 12.4% on FY19; 2H23 Group online sales
returning to growth of 3.2% on 2H22. FY23 Group online sales down 4.5% to $690.5 million reflecting favourable impact of store closures in 1H22, and now represents 20.5% of
Total sales. Compared to FY19, Group online sales3 are up 163.2%.”
We can think of that as decent enough when facing economic headwinds. We can also think of that as being more than a bit drear given that the performance is clearly deteriorating into the second half. “2H23 Net Profit After Tax (NPAT)4 of between $4 million and $8 million despite the prevailing headwinds generated from the macroeconomic environment affecting sales, margin and Costs of Doing Business; FY23 NPAT4 of between $69 million and $73 million, an increase of between 15% and 21% on FY22;” Profits are clearly slumping into that second half.
Myer Holdings share price from Google Finance
The point that we’ve all got to grasp here is that inflation has been happening. We’ve not had to deal with this in any grand manner for three or four decades now. But Australian inflation was 7.8% last year, falling to 7% in the first quarter this. That means that anyone whose sales are not up by 8% over the year is actually shrinking. And in that second half that does indeed mean that Myer Holdings was shrinking.
Now, we can say that’s all those economic headwinds perhaps. But that’s not quite right. Consumer spending isn’t falling by 8%. That’s the opposite of what inflation means. We need to get this straight in our heads. Not keeping up with inflation means a business is shrinking. Myer Holdings results are worse than most seem to be thinking.
