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.

If you are enjoying this article, you might like my recent article on the telecommunications sector.

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: or by phoning +612 8302 3633. 

comments powered by Disqus

DISCLAIMER: Rivkin aims to provide clear and simple information to those visiting our website. If any part of this disclaimer does not make sense, please phone Rivkin and ask to speak with a member of our Dealing and Relationship Management Team. Rivkin provides general advice and dealing services on securities, derivatives and superannuation (SMSF). Rivkin also provide SMSF administration and accounting services. Rivkin does not provide advice that takes into account your, or anybody else's, investment objectives, financial situation or needs. We strongly suggest that you consult an independent, licenced financial advisor before acting upon any information contained on this website. Investing in and trading securities (such as shares listed on the ASX) and/or derivatives (such as Contracts for Difference or 'CFDs') carry financial risks. CFDs carry with them various additional risks that differ from more simple securities such as fully-paid company shares. Some of these risks include not owning the underlying instrument from which a price is being derived, settling trades 'over the counter' with a financial institution rather than on a stock exchange, and using leverage to gain access to trades that may have a higher face value than your initial deposit. This risk of leverage means that it is possible to lose more than your initial investment. Our aim is to create more life choices for our clients, which means improving the wealth of clients throughout many market cycles by nurturing a relationship spanning many years. If you are not comfortable with your understanding of the risks involved before using a Rivkin product and service, please contact our office to seek further information or a Product Disclosure Statement, or make an appointment to sit with one of our friendly financial experts. It is in our interest for your Rivkin experience to be a rewarding and comfortable one. Rivkin is a trading name of Rivkin Securities ABN 87123290602, which holds Australian Financial Services Licence No. 332 802.