Is the worst over for Myer?

Is the worst over for Myer?

Local retailers have been doing it tough in the last few years, partly as a result of increasing competition from international retailers. MYR is no exception with the company’s net profit falling almost every year since 2010. The share price has responded accordingly, falling from a high of almost $4 in 2010 to $1.14 today. This morning, MYR reported its half year results for the year ended 28 January 2017 and the picture is starting to look better for the retailer.

Although revenue was down slightly (0.6%), net profit was actually up by 5.3%. MYR achieved this as a result of a $10m reduction in administration expenses and a $5m reduction in selling expenses. Interest expense was also reduced as a result of a $50m reduction in debt. Further good news came when looking at the statement of cash flows. After paying off the $50m in debt, and investing $58m back into the business, MYR’s cash balance still increased by $60m. The strong cash flow has allowed MYR to pay a $0.03 per share fully franked dividend for this half with another dividend of a similar amount expected in the second half. This would put MYR’s gross dividend yield at 7.5%, a respectably high yield.

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The outlook for MYR largely depends on your view of in store retailing. The opening of stores by international retailers such as H&M, Zara and Uniqlo in Australia is taking business from entrenched retailers such as MYR. Nevertheless, the CEO of MYR expects profit to increase in 2017, breaking the downward trend of prior years. This forecast assumes no deterioration in sales and same store sales growth for the reported half was a measly 0.3%, although at least it was positive. The retailer is currently undertaking a five-year restructuring plan that aims to restore sales growth back to above 3% per annum. Part of the restructure involves closing marginally profitable stores but also opening new stores in prospective areas. Today’s half year results announcement certainly bodes well for the restructuring plan and if MYR can continue on this path the share price today may prove to be good value.



Ready to chat about your portfolio? Get in touch today via email: william.oloughlin@rivkin.com.au or by phoning +612 8302 3633. 

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