Myer says it discovered it would miss its full-year forecasts by as much as 13 per cent only the day before it released its interim profit, as it defended its internal procedures.
The department store group issued the defence today in response to a “please explain” from the Australian Securities Exchange.
Myer (MYR) shares were savaged last week when the company shocked the market with a full-year profit downgrade.
The announcement raised questions because only 17 days earlier — when Myer announced the handover from long-serving boss Bernie Brookes to new CEO Richard Umbers — its chairman Paul McClintock said Myer had nothing to disclose to the market about its profit expectations.
Analysts and investors reacted with anger on March 19 when Myer admitted it would have to lower its full-year profit forecast due to tough trading conditions in February, which had spilled over into March. At the same time Myer also reported its interim profit had dived by nearly one quarter to $62.1 million.
Myer conceded its full-year profit would be in a range of $75 million to $80 million, whereas as late as March 2 the market was told it was on track to post a full-year profit of around $90 million.
Share market operator ASX had asked for more detail from Myer about the timing of the downgrade announcement, and whether the retailer believed it had breached disclosure rules by withholding information from investors.
In a lengthy letter to the ASX, released by Myer this afternoon, Myer chief general counsel and company secretary Marion Rodwell claimed that despite its half-year profit dropping by 23 per cent the retailer had still believed it could hit its full-year profit guidance, as measured by a consensus of 13 analysts.
Ms Rodwell told the ASX that on a number of occasions in December, January and February the Myer board and management had reviewed trading in the context of the full-year net profit and that a number of factors supported Myer’s position that the company’s results would be in line with the consensus net profit of around $90 million.
A full review of results was presented to the Myer board on February 27, with the directors still of the view it would hit consensus forecasts.
And right up until the day before Myer released its half-year results, along with its shock profit downgrade, the department store owner still held to its ability to hit analysts’ consensus profit of $90 million.
Ms Rodwell told the ASX that Myer first became aware that its 2015 profit outlook relating to net profit would be materially below consensus forecast during its board meeting on March 18 — only one day before it was to release its half-year results.
It was at that March 18 board meeting that directors decided to issue a revised profit forecast.
Myer claims generating a profit forecast is “complex’’ and involves deep analysis of its profit and loss, proposed promotions, current and forecast inventory positions and a range of other economic factors.
This process was begun by Myer’s chief financial officer as soon as the February profit and loss result became available.
After evaluating a number of data points the board at its meeting then determined its full-year profit would be materially below what the market was expecting.
However, it was too late that day to announce the downgrade and it was decided to inform the market the next morning, when Myer was scheduled to issue its half-year results.
Myer said its conduct was consistent with ASX guidance and market disclosure rules and that its processes were “robust, efficient and consistent with market practice’’.
Ms Rodwell said Myer was in compliance with listing rules.
Myer shares gained half a cent to $1.355 today, still well below the $1.53 they were trading at ahead of the profit downgrade.