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Myer says online will make profit in 2014

 

Myer insists it won't be beaten by the internet retail phenomenon and that its online business will turn a maiden profit this year as it revealed annual net profit fell nine per cent.

The growing switch to online sales and weak consumer sentiment are damaging traditional retailers, but Myer chief executive Bernie Brookes said he was not waving the white flag.

He blamed generous penalty rates and wage costs under Labor's Fair Work Act for a $10-$11 million negative impact on its $127.2 million profit.

He said he would consult the new coalition government about changing it.

"We're hoping that in dialogue with the government we're given the opportunity to express that we think stopping increases coming in is important," he told reporters.

The ability of overseas online retailers to escape 10 per cent GST on products was also an unfair "free kick" damaging local retailers who were Australia's biggest private employers, he said.

"We're certainly hoping that Mr Abbott and his team have a big set of ears to what very much needs to change," he said.

After growing profit in the first half, Myer's costs blew out in the second half with the cost of doing business increasing 3.1 per cent to $1.01 billion of the year to July 27.

Those costs are expected to increase another four to five per cent this fiscal year, with money pumped into online initiatives, new stores and refurbishments.

The business conceded that is likely to mean profit falls again in the current first half.

However online sales revenue should hit $50 million this year making the business profitable, Mr Brookes said, before profit grows again in 2014/15 as the benefits of the current spending flow through.

Consumer sentiment for September released on Wednesday by Westpac/Melbourne Institute was at three-year highs and is tipped to grow further after the election heading into Christmas.

"We're not putting a white flag up and saying we're getting no sales growth (this year), internally we're focused on driving topline sales growth," he said.

IG market strategist Evan Lucas predicted the company would ultimately start shutting suburban-based stores, while abandoning plans for new ones if possible.

Planned new stores at Maitland in NSW and Melbourne are being reviewed, and the number of stores is likely to grow from the current 68 to only 74, instead of the original target of 80-90, with stores constantly reviewed, Mr Brookes said.

"What's changed is the lack of development of shopping centres in Australia because of the online phenomenon," he said.

Online comprises 10 per cent of Australian consumer sales but that is growing.

The company's shares have risen by about 30 per cent so far in 2013, but slumped 11 cents, or 3.8 per cent, to $2.77 on Thursday.