At time of writing, the share price of Myer Holding Limited [ASX:MYR] is down .48%, trading at 62.5 cents.
The Myer share price started rising in the lead up to their results release on Wednesday, and finished the day up 10.5%.
With the last top being around 69 cents, Myer shares may struggle to rise much further in the short-term:
Today we look at the prospects for future Myer share price growth, its progress on pivoting its business and its long-term outlook. We conclude that despite its recent uptick, the Myer share price may struggle to keep going up as a mid-cycle slowdown approaches.
Highlights from Myer results point to progress
Here were the main takeaways from the Myer results announcement on Wednesday:
- NPAT up 2.2% to $33.2 million
- Online sales up 25.6% to $262.3 million
- Total net debt reduced by $69 million to $39 million
Their EBIT beat consensus forecasts of $56.7 million, coming in at $58.5 million.
Despite these strong results, total sales were down 3.5% to $2.99 billion. On the whole though, these were strong results for a business that is in a difficult sector (retail) at a difficult time.
Myer is trying to pivot its business towards online sales as consumers increasingly shift away from brick and mortar stores.
We previously suggested that there may be a future cap on their online sales growth.
This cap would be caused by the retail ‘sugar-hit’ offered by buy now-pay later platforms like Afterpay subsiding over the course of a 12–18-month window.
So the fact that Myer has yet to see a slow down here is certainly a good sign.
This is also the first time Myer’s profits have risen in the last nine years.
The company is aggressively shrinking floor space in a bid to improve profitability with 29,000 m2 of Gross Lettable Area closed — with a further 5–10% under discussion.
The Myer outlook could be impacted by these three factors
Now, after being stuck in a holding pattern over the course of July and August, the future suddenly looks brighter for the retailer.
CEO John King said of the Myer outlook for FY2020: ‘We anticipate the challenging macro environment and subdued consumer sentiment to continue during FY2020. However, we have identified a number of opportunities to improve productivity and to continue to reduce costs, through both cost savings and efficiencies, across our supply chain as well as other noncustomer facing activities.’
But as markets get choppier and the US–China trade war rumbles on, these three things could impact Myer’s ability to hit the $1 mark by the end of the calendar year:
- Stagnant housing market
- Global mid-cycle slowdown
- RBA cash rate
Myer may get help on the interest rate front, with further cuts potentially in the offing. Aussies have a large amount of their wealth tied up in the housing market, and when they are confident about the value of their home, this has flow on effects to spending habits.
But the RBA is cutting rates because they are fearful of a mid-cycle slowdown as commodity prices (in particular iron ore) fall.
China may introduce further stimulus, propping up commodity prices for a time, however the RBA might still bow to pressure and follow the RBNZ to zero.
All of this is part of the complicated macro picture for Myer shares, as consumer spending on non-essentials is a complex beast.
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For Money Morning