In today’s daily we have covered stock research on MYER.

S&P 500was down by 15.21 points or 0.81% to 1863.40 on Friday. S&P 500 declined on Friday pulled lower by a selloff in consumer discretionary stocks as bellwether names Amazon.com and Ford Motor fell in the wake of their quarterly earnings.

Amazon's stock declined a day after the company reported a jump in quarterly revenue, which was offset by sharp increases in spending. Investors continued to pay attention to geopolitical strife over Ukraine, creating some nervousness. While the situation has taken a backseat to corporate earnings recently, investors remain on edge over the possible result of escalating tensions. In the latest economic data, U.S. consumer sentiment rose to a nine-month high in April, according to the Thomson Reuters/University of Michigan index.


S&P Daily Chart (Source - Thomson Reuters)

S&P ASX 200 was up by 13.20 points or 0.24% on Thursday and closed at 5531.0 points. Japara Healthcare (JHC) announced Westpac Bank to be holding shares representing 6.33% of the voting power. The agribusiness group Ruralco Holdings has indicated half year earnings to jump 35% to $22.1 Million as the company diversifies its operations and drought conditions improve.

JB Hi- Fi announced NAB to be holding shares representing 5.03% of the total voting power. TV Network ABC has signed a deal with Indonesia’s MNC Group similar to the one with China’s Shanghai Media Group which allows it to sell and give away its programs across Indonesia. The Australian dollar has drifted lower following weakness on global share markets late last week.

ASX 200 Daily Chart (Source – Thomson Reuters)

Top performers on the ASX 200 were:-

Stock of the Day – Myer (MYR)
 
Myer is Australia’s largest department store operator with 67 stores in locations mostly spread across eastern states. Stores are generally located in areas of high foot traffic in major metropolitan shopping centres. Competitive advantages include a well-established brand and scale benefits from a relatively large store base.
 
Myer reported a 0.3% increase in revenue to AUD 1,737 million with net profit after tax or NPAT down 8.1% to AUD 81 million. This result reflects the step up in operating costs as the company invests in the store portfolio and its online platform to drive long term sales growth. We believe that despite an ongoing step up in investment we expects sales growth will be far more difficult to achieve as retail dollars become increasing fragmented across a more competitive market.


Source – Myer

The internet has lowered barriers to entry across the retail industry, making it increasingly easy for consumers to shop for better value. We expect competition from large scale international retailers for the Australian disposable retail dollar will increase lowering the returns on offer for domestic retailers. For the first time in four years Myer reported a fall in operating margin from 41.2% to 41.0%.


Myer Daily Chart (Source – Thomson Reuters)

Operating margins had been growing as the company extracted cost savings from repositioning the business to direct sourcing, with own brand representing 20% of total sales. Other initiatives include the reduction in shrinkage and the implementation of technology systems to improve productivity. The chance for David Jones and Woolworths South Africa deal to go through is high. Longer term we believe the deal is negative for Myers given the new entity will have greater scale, more stores, more funding and is targeting a broader customer base. We believe the stock is overvalued at its current price and would review the stock at a later date.

 

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