Myer Holdings Limited

Update Regarding the Federal Court’s Judgement:Myer Holdings Limited (ASX: MYR) operates a portfolio of 66 department stores across Australia. The market capitalisation of the company stood at ~$476.34 million as on 24 October 2019.
The company recently announced that the Federal Court handed down judgement in respect of historical matters, which were the subject of the shareholder class action brought against Myer by TPT Patrol Pty Limited. The Court held that MYR had reasonable grounds in making that representation on 11 September 2014 and dismissed a claim that the representation was misleading or deceptive or involved a breach of MYR's continuous disclosure obligations at that time.

The Court also found that, as MYR subsequently became aware that its NPAT in FY15 would be materially lower than FY14, it was required to make a corrective announcement. Thus, by failing to make a corrective announcement until 19 March 2015, MYR engaged in misleading or deceptive conduct and contravened its continuous disclosure obligations on and from 21 November 2014 until 19 March 2015. Notwithstanding these contraventions, the Court found that there is no evidence that establishes those contraventions caused any loss or damage to the class members.

FY19 Results Highlights for 52-Weeks to 27 July 2019: Total sales for the period were down by 3.5% to $2,991.8 million, and comparable store sales went down by 2.9%, in part reflecting its focus on profitable sales. Excluding the sales of Apple products, FY19 comparable sales were down by 1.3%. The loss was partly recovered via improvements in merchandise and store layouts and continued growth in digital sales. Total digital sales in FY19 grew by 21.9% to $292.1 million. EBITDA for the period was reported at $160.1 million, up 7.2% on prior corresponding period. NPAT for the period stood at $33.2 million, up 2.2% in comparison to pcp. Earnings per share were reported at 4.0 cents per share.

The improved operating gross profit margin was driven by an improved Myer Exclusive Brands’ (MEBs) mix along with lower promotional markdowns and shrinkage. During the year, the company successfully grew MEBs by 1.9% to $527.2 million, representing 17.6% of total sales as a result of improved merchandise and the prioritisation of brands both in stores and online.

The cost of doing business reduced by $32.6 million during the year, which was achieved due to improved efficiencies in stores and at the support offices.


Financial Performance (Source: Company Reports)

The company’s operating gross profit margin stood at 38.85% in FY 2019, which implies an improvement of 65 basis points on FY 2018 margin of 38.2%.

MYR’s debt to equity ratio stood at 0.14x in FY 2019, which is below the industry median of 0.67x,which shows that the company is in a decent financial position and can further raise debt, if required. The company has a price to earnings multiple of 19.330x on TTM (Trailing Twelve Months) basis, which is higher than the Industry average of 13.5x on TTM basis. The stock has generated returns of 8.41% and -18.88% over a time frame of three months and six months, respectively.Currently, the stock is trading slightly above the average of 52-week high and low of $0.740 - $0.360. Hence, considering the aforesaid facts, judgement by Federal Court, current trading levels, etc., we advise the investors to closely watch the stock at the current market price of $0.570 per share, down by 1.724% on 24 October 2019.

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