Earnings doubled, dividend surprise and a positive guidance: Myer defies the retail doom and gloom

Myer's (ASX: MYR) shares rallied as much as 19% on Thursday to levels not seen since May 2017 following its latest half-year FY23 triple crown (an earnings beat, dividend beat and positive outlook).

First-half results at a glance

• Total sales of $1.88 billion, up 24.2%

• Group online sales mix of 20.3%

• Net profit of $65.0 million, up 101.4%

• Net cash position of $267 million compared to $50 million a year ago

• Interim dividend of 8 cents per share (comprised of 4 cents ordinary dividend plus a special dividend of 4 cents)

Key takeaways

On sales growth: Myer's half-year sales between FY17-20 had a compound average growth rate of -3.4%. The company has now reversed that downtrend, with 1H23 sales 17.2% higher than pre-Covid.

Member momentum: Myer One members are up 11.4% year-on-year to 7.0 million while active members are up 17.1% to 4.1 million, representing one of Australia's largest retail loyalty programs.

Strong cash flow: Myer posted $174.9 million in free cash flow for the first-half, up from $173.1 million a year ago. That's a free cash flow yield of approximately 22% (compared to current market cap of $780 million).

Outsized cash position: Myer remained net cash for the entirety of 1H23, the first time since its ASX listing. The $267 million cash position represents just over a third of the company's current market cap.

Huge dividend: Ord Minnett was expecting Myer to pay out a full-year dividend of 6.6 cents per share. But Myer has lapped those expectations, paying out an interim dividend of 8 cents per share. At its current share price of $1.035, that’s a 7.7% yield.

Trading update

Group sales have increased 16.1% over the eight weeks since Christmas. This is in-line with trading updates from peers such as Premier Investments (ASX: PMV), which noted 23.6% sales growth for the first 17 weeks of 1H23.

“Like all retailers we remain cautious about the macro-economic environment, however, we are pleased with the momentum we are generating through the Customer First Plan and have a strong pipeline of initiatives still to come, which will ensure we are well placed for the future," said CEO John King.

Myer 12-month price chart (Source: Market Index)