Department store Myer’s share price has fallen by 30 per cent in the days after its FY25 trading update earlier this week, currently sitting at a new low of $0.46 cents per share.
It's the lowest its been since mid-2022, and comes amid a stark slip in underlying net profit of 30 per cent to $36.8 million. Or down 586.1 per cent in statutory terms to negative $211.2 million if you account for the one-off, non-cash impairment of $213.3 million for the group's new Apparel Brands portfolio that includes Just Jeans, Jay Jays, Jacqui E, Dotti and Portmans from its former owner Premier Investments – mostly due to the shift in share price during the sale process.
Despite that, some analysts are still gung-ho on the transforming retail group.
Investment bank Petra Capital told investors in a note that it is retaining its buy rating on Myer Holdings (ASX:MYR), with a target price of $0.75 per share. This came a few hours after the group released its trading results.
Myer’s current share price of $0.46 (as at 9am on Friday morning) is down from $0.64 prior to the September 23 results, and is down from a 12-month peak of $1.26, recorded on December 27, 2024.
The analysts did cite all the expected concerns, including rising cost of doing business as a percentage. Myer’s CODB lifted by 22.6 per cent to just over $1 billion, reflecting inclusion of Apparel Brands as well as higher store costs impacted by minimum wage increases, occupancy outgoing costs impacted by inflation, and additional people capability to execute on the Myer Group Growth Strategy.
In terms of margin, CODB/Sales lifted by 230 basis points to 27.9 per cent. Petra analysts expect these cost pressures to continue into FY26.
However, they did note that Myer’s ‘Value Creation’ program has partially offset this. Myer noted it will implement short and medium-term initiatives to reduce complexity and cost as well as increase productivity across the business.
Petra analysts also pointed to an operating expenditure drag from the national distribution centre (NDC) launch. Myer faced implementation issues and a delayed ramp-up with the NDC in the first half of FY25.
According to Petra analysts, this opex drag has reduced, but Myer has tabled a $32 million investment for a long-term solution.
On top of a slump in profit, Myer also reported subdued growth in total sales, which grew just 0.5 per cent to $3.67 billion in FY25.
Sales across the Myer Retail segment – excluding Apparel Brands but including Sass & Bide, Marcs and David Lawrence (SBMDL) – lifted by 1.2 per cent, with operating profit relatively unchanged at $1.18 billion. The Apparel Brands mix’s sales fell by 1.7 per cent to $367.8 million, with operating profit down 1.8 per cent to $219.1 million.
Myer noted that the total sales lift in the Myer Retail segment reflected growth in concessions offset by lower sales in Myer Exclusive Brands (MEBs) and National Brands.
As for the Apparel Brands, the 1.7 per cent fall was driven by softer performance in Dotti, with sales there down 8.9 per cent in the second half of FY25. This was offset by growth in Portmans in the second half, with Just Jeans and Jay Jays relatively flat.
“Dotti's winter range underperformed, particularly in key seasonal categories,” Myer reported. “The macroeconomic environment in New Zealand remained subdued, impacting consumer sentiment and discretionary spend.
“In addition, the business closed 15 stores in New Zealand for performance reasons. These headwinds were partially offset by stronger sales in Q4 across the Australian market, led by a solid performance in Just Jeans.”
The Apparel Brands segment’s negative growth in sales continued in the first seven weeks of FY25, offset by a 3.1 per cent lift in Myer Retail.
Petra Capital continued its scrutiny, noting that strategic initiatives are on track, with corresponding earnings benefits reaffirmed. This includes expanding Myer One loyalty into Apparel Brands in August, with a revision of the program being finalised in October.
Merger synergies of $30 million were reaffirmed by Myer up to the first half of FY27, With Petra adding this includes net finance cost savings of around $11 million.
A different investment bank, Canaccord Genuity, also retained its buy rating of Myer shares, but with a target price reset to $0.79 cents per share. That’s down from $1.05 previously.
Within its note to investors, Canaccord analysts gave a thumbs up to Myer’s brand health, pointing to improved like-for-like performance, a 7 per cent lift in active member growth and a 230 basis point lift in its tag rate to 79.5 per cent.
They also approved of the Just Jeans turnaround, which includes a new store format, the new shoppable app that launched in August 25, and the upcoming relaunch of Myer One.
This approval was offset by the CODB growth, as well as the Myer Exclusive Brand performance, which reported lower sales in FY25 due to the challenged NDC launch. They also didn’t like Dotti’s performance in particular.
Canaccord Genuity analysts said Myer’s FY25 result contained a few negatives, but said the perceived positive anecdotes have not been considered, nor rewarded by the market.
Alongside the lift in sales in early FY26, they note that the group’s operating momentum in the fourth quarter of FY25 looked solid, pointing to a 4 per cent lift in Myer Retail sales (excluding Apparel Brands), and Just Jeans strengthening.
“A stronger start to 1H26E and a more robust consumer should provide scope for solid gross profit delivery in FY26E, in our view,” Canaccord told investors. “We have however allowed for an additional CODB relative to prior thinking, which sees downward FY26E revisions.
“Execution on cost synergies ($30m annualised by 1H27E), a long-term solution for the company’s distribution centre woes ($20m annualised benefit by FY28E albeit with a $32m cost to deliver) and a targeted $10m turnaround in SBMDL anchor what should be a much larger operating profit come FY27E/28E.”