Myer Holdings Ltd (ASX: MYR)

Beaten down but online sales are giving some hope: Myer Holdings’ stock was down 4.6% on November 01, 2017 as the group came up with a strategy update and Q1 FY18 sales. The group has been slammed for slashing sales growth while new targets under the New Myer strategyhave been set amid a challenging and fast-changing retail environment. Looking at the results, Solomon Lew of Premier Investments (MYR’s largest shareholder) says to have been seeingonly weeds and no green shoots in the group’s turnaround strategy as otherwise claimed in MYR’s recent reports.

With regards to the first quarter sales result, there was a fall of 2.8% to $699.0 million for 13 weeks to October 28, while same-store sales fell 2.1%. On the other hand, a 3.6% rise was noted for sales per square metre basis store closures. Online sales surged 67.8% and click & collect grew to represent 22.1% of orders.

In its strategy update, the group indicated for its aim to grow sales per square metre or productivity by 10% by 2020 instead of 20%. Underlying earnings per share are forecasted to grow by 5% compound annual growth rate between 2017 and 2020 and return on funds employed may exceed 10%, which is below the original target of 15%. The group might close or reduce about 19 stores by 2025 over the closure of four stores indicated in 2017, and the focus will be on the top performing storeswith new retail concepts including new food venues, beauty and grooming services and better customer service. The group’s chief executive, Richard Umbers has said that the New Myer will evolve to ensure Myer’s relevance in a highly competitive and rapidly changing retail environment, and has acknowledged that customers are increasingly shopping online, and traffic to shopping centres and physical stores is declining.

While the group has re-calibrated the metrics considering the tougher trading conditions, the $600 million strategy for a turnaround still remains itsbest foot in front for performance going forward.
 

Harvey Norman Holdings Ltd (ASX: HVN)

Relief from headwinds from ASIC: Harvey Norman Holdings’ stock rallied 5.6% on November 01, 2017 with the update that ASIC is not intending to make enquiries into the retailer’s accounting practices and particularly with regards to consolidation of its franchise stores.
For FY17, Harvey Norman had reported NPAT growth of 28.79% to $448.98m while revenue from ordinary activities were of the order of $3,167.01m, indicating a 4.65% growth over FY16. Although the group seems to be performing well and now is free from any anticipated ASIC investigation, the headwinds from challenging retail environment with entry of Amazon prevail.

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