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Australia's Myer issues profit warning as Christmas fails to deliver

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Australia's biggest department store operator Myer Holdings said weaker-than-expected pre-Christmas trading would hit first-half profit, the latest in a series of downgrades that sent its shares to a record low.

[SYDNEY] Australia's biggest department store operator Myer Holdings said weaker-than-expected pre-Christmas trading would hit first-half profit, the latest in a series of downgrades that sent its shares to a record low.

The warning underscores the challenge facing department store operators around the world to withstand the explosive growth of online shopping led by Amazon.com, which began taking orders in Australia on Dec 4.

"Trading during the past two weeks has been significantly below our expectations and the year-to-date run-rate," Myer chief executive officer Richard Umbers said in a statement.

December-half profit would be "materially below" a year earlier, it added.

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Myer shares fell 7.6 per cent in a flat overall market, hitting a record intraday low of 63.5 Australian cents in morning trading. The shares were issued at A$4.10 in a 2009 listing.

After warning in November that sales for that month were down 2.3 per cent, Myer said sales for the first two weeks of December were down five per cent on the same period a year earlier.

"They're in the firing line from a competition perspective, from an underlying sales perspective, from a demand perspective, from internet risk over the long term, and Amazon's just started," said Lonsec Research equity strategist Danial Moradi.

"I can't see a scenario where they start upgrading earnings, even over the medium term. If retail conditions and disposable income do increase, there's other avenues to spend that money."

Australia has recorded soft retail sales for months as cut-throat competition, relentless price discounts and online competition sap demand for brick-and-mortar shopping. Official figures do not include online sales.

Myer's nearest rival, David Jones, has weighed on the earnings of its owner, South Africa's Woolworths Holdings. David Jones sales fell 5.3 per cent in the 20 weeks to Nov 12, its latest trading update said.

Myer has said it is in the early stages of a five-year turnaround plan which involves ramping its online offering and shuttering underperforming stores. It currently has 67.

Its biggest shareholder, billionaire retail investor Solomon Lew, has been a vocal critic of the company for months, amid market speculation about a possible takeover. Lew's Premier Investments took a 10.8 per cent stake in March.

Lew said through a spokesman on Thursday that he had warned Myer on Dec 1 that "there is worse to come".

REUTERS