Department store operator, Myer has been smashed by its shareholders and this led to a 9.6% drop in the stock price on December 14, 2017, at the back of a profit warning. Since MYR’s AGM on November 24, 2017, the group’s sales have remained below expectations owing to the prevailing challenging retail conditions with lower foot traffic, persistent discounting across the industry and subdued consumer sentiment. With weaker-than-expected pre-Christmas trading, the first-half profit has been flagged to witness an impact without any recovery expected in the remaining part of the first half post weakness continuing from Q1. Accordingly, 1H 2018 NPAT is expected to be below previous corresponding year.

The group has otherwise invested heavily in marketing and traffic-driving initiatives, however, total sales to the end of November were still down 2.3% and 1.8% on a comparable store sales basis. Sales have been below expectations with a fall of 5% in the first two weeks of December over the previous corresponding period with the ongoing weakness. The subdued trend of sales and profit follows the weakness of Q1 FY18 wherein total sales were down 2.8% while comparable store sales were down 2.1%.

The group had earlier signalled about the tough retail conditions in November while online business has also not been able to offset the trading weakness in some stores.

While the group seems to be optimistic about its turnaround strategy, the overall scenario appears to be making MYR fall in the pit foreseen by Myer’s biggest shareholder, Solomon Lew, who has been criticising the group for its strategy for quite some time.

MYR stock has fallen 16.2% in last six months (as at December 13, 2017). We maintain a “Hold” on the stock at the current price of $0.655

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