One of Australia’s most recognised retailers, Myer Holdings Ltd [ASX:MYR], is doing it tough through 2020. Experiencing widespread store closures throughout the country.
All stores were closed throughout the months of April and May, with approximately 10,000 staff stood down and stores still closed in Victoria due to stage 4 lockdown laws.
But it’s not all bad, the MYR share price was trading at 22.2 cents at the time of writing, the company is holding its head above water…for now.
What’s happening at Myer?
Before the COVID-19 pandemic hit Australia, retail conditions were looking grim.
Throughout 2019 there was a spate of big retailers that were heading towards administration.
EB Games, Jeans West, Harris Scarfe — all felt the weakening economic conditions and weak wage growth, along with the higher usage of online shopping.
Myer was no different, struggling in times when spending was declining.
Then along came COVID-19 in 2020, an economic apocalypse and worst nightmare for retailers.
The virus forced widespread closures of brick-and-mortar stores, putting the brakes on business.
For Myer the store closures meant letting go of a lot of staff and the realisation that the company would report a loss for the year.
With the FY20 results being announced recently, the loss recorded is only a net loss after tax of $11.3 million.
I say only as this could have been so much worse.
With people stuck at home — online shopping exploded!
Myer having so many offerings for customers has reaped the rewards on a strong online sales presence.
While total sales were down 15.8% to $2,519.4 million, the company’s online sales were up 61.1% to $422.5 million.
The boom in online sales looks to be the safety net for Myer in 2020.
Where to from here for Myer?
The company is far from out of trouble just yet, even with the encouraging online sales performance.
In 2019 is was reported that business confidence had fallen to a six-year low, which can only be lower now considering the pandemic.
This was coupled with a major issue for the company regarding their insurance.
QBE Insurance Group Ltd [ASX:QBE] announced recently it will stop providing insurance for suppliers who want to cover the risk of not getting paid by Myer.
A clear sign of the lack of confidence in the retailer and the retail sector overall.
Without a clear end in sight of the pandemic then survival is the best the company can hope for at this point, I believe.
From where the price sits at the time of writing, if it happens to keep declining, then the level of 18.9 cents may provide support to a fall as it looks to have been strong throughout the lockdown stages.
If it can get to the upside, then the levels of 23 and 28 cents may come into play.
For Money Morning
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