Myer Holdings Ltd [ASX:MYR] released another weak quarterly sales update yesterday, leaving many questioning the future of retail.
The retail giant’s results showed a 2.7% slide in total sales, while the executive chairman Garry Hounsell tried to lay blame on the weather.
But investors have clearly seen an upside.
Myer’s long-suffering share price rocketed up 16% yesterday, leaving analysts scratching their heads.
Why did the Share Price Go Up?
While a drop in sales happened, the numbers didn’t fall as low as the market expected, leaving investors surprised by the result.
Online sales continued to show strength throughout the third quarter, growing 49% to $36 million. They’re now accounting for close to 5.5% of all sales, and this number’s only predicted to grow.
Also a new CEO, John King, will be heading up Myer from early June. King is known for his revival of the British department store House of Fraser from 2006 to 2014.
Myer Executive Chairman Garry Hounsell has revealed that King has received a ‘”full mandate” from the Board to “deliver and improvement [sic] in financial performance”.’
It looks as if retail investors could be banking heavily on this change in leadership.
The current strategy of heavy discounting has been publicly criticised by many, including Myer’s largest shareholder, Sol Lew, who accused Myer of ‘selling dollar notes for fifty cents.’
Hounsell tried to soften the blow, pointing to ‘the unseasonable warm start to winter’ as the reason why current stock — winter apparel, shoes and accessories — weren’t selling.
What’s next for Myer?
Myer’s had it tough for a while now, but so has the retail industry as a whole.
These numbers mark Myer’s sixth quarter of negative sales growth in a row, while shareholders are still feeling the sting from its recent $476 million record loss.
Also, Myer has revealed it would no longer be providing quarterly sales updates, and has given no reason for the decision. A lack of transparency could turn prospective investors off.
But with a fresh face in leadership, a new focus on ecommerce and better pricing strategies, Myer could perhaps return to its former success.
How long that will take is another story.
Editor, Money Morning