Will Myer Shares Keep Going Up? Another Look at the Myer Share Price

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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:

asx myr

Source: tradingview.com

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.

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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

In the past, we correctly flagged that the Myer share price could struggle to break above the 75 cent mark.

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:

  1. Stagnant housing market
  2. Global mid-cycle slowdown
  3. 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.

We’ve come up with three investment ideas for profiting from the US–China trade war, which you can find out about here. They are certainly controversial, but if you think Trump will follow through with more tariffs, they are definitely something you should know about.

Regards,

Lachlann Tierney,

For Money Morning

About Lachlann Tierney

Lachlann Tierney is an Analyst for Money Morning and has been investing for nearly a decade. With a Masters of Science from the London School of Economics, he brings a sound understanding of global markets to his writing. Lachlann is interested in emerging technologies, energy solutions and helping people invest…

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