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Myer Profit Beats Estimates as Gadgets Switched for Fashion

March 14 (Bloomberg) -- Myer Holdings Ltd., Australia’s largest department-store company, rose to the highest in almost two years after it reported net income that beat estimates as it cut less-profitable electrical goods in favor of fashion.

Net income was A$88 million ($91 million) in the six months ended Jan. 26, the Melbourne-based company said in a regulatory statement, up 0.7 percent from a year earlier and beating the A$86 million median estimate of six analysts surveyed by Bloomberg News. The shares climbed 5.9 percent to A$3.07 at the close in Sydney, the highest since May 2011.

Myer has reduced sales of large electrical goods, CDs and DVDs and dedicated the space to clothing, cosmetics and fashion accessories, with sales from the store’s house brands rising 10 percent and those from concessions up 4.9 percent, the company said. Second-quarter sales from stores open at least 12 months rose 1.7 percent, their best result since the first quarter of the 2010 fiscal year, according to data compiled by Bloomberg.

“We are pleased that the positive sales trend continued during the half,” Chief Executive Officer Bernie Brookes said in a statement. “Suppliers have been supportive of our endeavors to be more competitive for our customers in a global marketplace.”

Gross margin, a measure of the difference between shop-floor prices and the wholesale price paid by the store, rose 23 basis points to 41.21 percent, the company said, while a A$56 million reduction in debt cut net debt to 0.78 times earnings before interest, tax, depreciation and amortization, compared with 0.94 times Ebitda 12 months earlier.

The company said it wouldn’t provide guidance for full-year sales or profit and is “cautious about the trading environment”. Bills, taxes, investments and depreciation will increase operating costs by at least A$7 million in the second half, the company said.

To contact the reporter on this story: David Fickling in Sydney at dfickling@bloomberg.net

To contact the editor responsible for this story: Anjali Cordeiro at acordeiro2@bloomberg.net

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