(Reuters) - Australian department store owner Myer ( MYGSF ) on Wednesday posted lower interim earnings, citing logistical challenges at a distribution centre in Victoria and strategic review costs, while painting a gloomy outlook due to weak economic conditions.

The firm, which finalised the purchase of the apparel brands portfolio from rival Premier Investments ( PMAUF ) in January, said the sales for the first five weeks in the second half of the fiscal year were already down by 2.6%.

Shares in Sydney dropped 10.5% to A$0.68 and hit their lowest since June 24, 2024.

Total sales at the retailer were A$1.83 billion ($1.16 billion), with comparable sales up just a touch below 1%. This reflects the closure of Brisbane and Werribee stores coupled with other closures.

The retailer posted net profit after tax of A$42.4 million for the 26 weeks ended January 25, an 18.5% decrease from the previous year.

"Distribution centre issues certainly didn't help matters either, but for Myer's ( MYGSF ) profit to start looking healthier next time around the company will be hoping for brighter retail conditions to emerge," said Tim Waterer, an analyst at KCM Trade.

The results come after Myer's ( MYGSF ) January warnings of sluggish sales and earnings during the major festive periods of Black Friday, Christmas and Boxing Day.

A measure of Australian business activity dropped to its lowest since the pandemic last November due to tough trading conditions in both manufacturing and retail sectors, suggesting the local economy had not picked up from a time when households struggled with rising costs of living.

Myer ( MYGSF ) had updated the market regarding the construction of a national distribution centre in Victoria during 2021, which went live in August 2024.

"The site has experienced implementation issues and is not yet operating as designed," the firm flagged.

"If I was a shareholder, I'd be demanding more clarity as to what constitutes 'operational issues' given (if the matter is warehousing, technology, system or infrastructure)," said Jesse Moors, portfolio manager at Spatium Capital.

($1 = 1.5721 Australian dollars)

(Reporting by Rishav Chatterjee in Bengaluru; Editing by Vijay Kishore and Lincoln Feast.)