Myer Holdings Ltd (ASX: MYR)

Down 11% in last three months (as at February 08, 2018), Myer Holdings Ltd.’s stock further plunged about 9.3% on February 09, 2018 post the group updated the market about its 1H 2018 results. In December 2017, the group had announced a second quarter trading update that highlighted deterioration in trading during the start of the second quarter following a subdued performance during the first quarter. Particularly, MYR’s total sales to the end of November were down 2.3% and comparable store sales were down 1.8%, against the prior corresponding period (pcp). Total sales during the first two weeks in December were down 5%. Further, the group had put forth expectations for 1H 2018 NPAT (pre-implementation costs and individually items) to be materially below the pcp. Total sales during January were seen to be down 6.5% and for the first-half down 3.6% to $1.7 billion, or 3% lower on a comparable store sales basis.

With the latest trading update and issues at hand, MYR anticipates 1H 2018 NPAT to be now between $37m and $41m, pre-implementation costs and individually items. This has been based on the continuation of the challenging environment which finds support from widespread industry discounting, a subdued performance of Myer’s Stocktake Sale and a continued shift in consumer behaviour characterised by reduced foot traffic and an increase in online shopping.

While the sales shortfall has been reported for December and January, the group is said to be comfortable with the quality of its inventory. Further, online sales in the first half have given some respite to the group by being up 48.9%. While the group failed to provide full year profit guidance in view of no material improvement foreseen in the second half, a non-cash impairment charge has been highlighted to be accounted for the first half 2018 result. Nonetheless, the group is continuing its focus on online and productivity and efforts on annualised cost savings of about $7 million amidst low growth environment.

We have a “Hold” on the stock at the current price of $0.585

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