Why Myer Holdings Ltd (ASX:MYR) Shares Bounced 8% Today

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Myer Holdings Ltd (ASX: MYR) shares bounced 8% higher on Friday following the release of its AGM presentation to investors.

Myer Holdings is the name behind the popular department store retailer. Myer is named after Sidney Myer who arrived in Australia from Russia in 1899. Today, Myer has tens of thousands of shareholders and offers retail products from over 1,000 suppliers through its nationwide ‘big box’ department stores.

Having re-listed its shares on the ASX in 2009 at around $4, Myer shares now change hands for under $0.50.

What Happened?

Hosting its Annual General Meeting (AGM) in Melbourne today, Myer’s CEO John King gave shareholders an overview of its priorities going forward.

Coming into the busy Christmas trading period Myer said it will strive to put exclusive products in its stores, increase pop-up stalls and have additional team members.

In its 2018 financial year, Myer posted a 3.2% decline in sales and statutory loss. However, Chairman Garry Hounsell said the group’s strategy is to execute on its “Customer First Plan”.

“This is a plan to put customers first in every action Myer takes and every decision Myer makes,” Hounsell said.

Talking to the recent first-quarter performance, Hounsell said that it is not unusual for Myer to report a loss in its first quarter.

“During the last five years, Myer has incurred an NPAT loss (pre-implementation costs and individually significant items) in the first quarter of each financial year.”

“Due to the heightened focus on profitability, total sales value in Q1 FY19 was below Q1 FY18, however, importantly the NPAT loss (pre-implementation costs and individually significant items) for the quarter showed an improvement on Q1 FY18. “

The improved profitability could be the reason investors are buying up Myer shares today.

What Now?

Myer seems to be caught between a rock and a hard place. Indeed, while its online retail channel is growing quickly there is strong competition across both of its key sales pipelines.

In the online marketplace, there are agile competitors like independent brands, Amazon and platforms like Redbubble Ltd (ASX: RBL).

In the physical marketplace, department stores seem to have lost foot traffic to shopping centres. That sounds unusual so I’ll explain what I mean.

Think about it like this: Whereas people used to go shopping at Myer because that’s where all the good brands were, consumers now go to the shopping centre itself because they can choose from every store and brand, and have a better experience.

That’s not a new phenomenon but it’s an important distinction and change in consumer spending.

I see neither of these two powerful trends (i.e. the increasing popularity of online and in-store competition) changing anytime soon. So the questions in my mind are:

  • Can Myer’s online store grow quickly enough to be a sustainable revenue driver?
  • Is there considerable value in the existing store network and assets?

While Myer’s current market capitalisation of around $350 million seems low and its price-earnings ratio (P/E) of ~10x looks tempting, the company’s shares have looked tempting for about 9 years.

I hope that they can continue the recent improved performance, but for my money companies like Premier Investments Ltd (ASX: PMV), Redbubble Ltd (ASX: RBL) and online retailers are probably worthy of my attention first.

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Disclaimer: Any information contained in this article is limited to general financial/investment advice only. The information has not taken into account your specific needs, goals or objectives, so please consider consulting a licenced and trusted adviser before acting on the information. Please read The Rask Group’s Financial Services Guide (FSG) for more information. This article is authorised by Owen Raszkiewicz of The Rask Group, which is a corporate authorised representative No. 1264179 of Strawman Pty Ltd (ACN: 610 908 211) (AFSL: 501 223).

Owen Raszkiewicz

Owen Raszkiewicz

Owen is the Founder of Rask Australia, Lead Investment Analyst for Rask Invest and head educator at Rask Education.