Weeks after Premier Investments’ Apparel Brands combined with Myer, analysts have indicated that the latter’s share price could surge if the leadership at the company adopts the right strategy for growth.
Analysts at Morgan Stanley told their clients last week that Myer’s share price could more than double and hit $1.70, up from their current value of around 80¢, under a best-case scenario.
The analyst suggested that for this to happen, lower interest rates and tax cuts must also prompt shoppers to spend more.
Morgan Stanley’s Chenny Wang wrote that Myer was in the early stages of its turnaround strategy to restore growth and while execution risks were “high”, there was a “pathway for its share price to double,” reported the Australian Financial Review.
The recent combination of Myer and Apparel Brands will see the latter’s Just Jeans, Jay Jays, Portmans, Dotti and Jacqui E brands combined within the Myer portfolio.
“Our combined business will be a leading omni-channel retail platform with pro forma historical annual sales of more than $4 billion in FY24 and a stronger balance sheet to fund future investment and growth. It will create a business with an extensive footprint of 783 department and specialty stores, supported by more than 17,000 team members,” said Myer Executive Chair Oliva Wirth at the time that the company’s shareholders voted in favour of the deal.
Myer issued 890.5 million shares to Solomon Lew’s Premier for the acquisition of the Apparel Brands business, and Premier also paid Myer $82 million in cash. Myer shareholders (including Premier by way of its existing shareholding) hold 48.5% of issued capital in Myer, while Premier received 51.5% of issued capital in Myer. The Myer shares will then be distributed to Premier Investments shareholders.
Premier Investments’ Solomon Lew also returned to Myer’s board as a director, alongside him retaining his position as chairman at Premier.
“Store rationalisation projects executed well can deliver great returns with limited sales leakage,” wrote the Morgan Stanley analysts.
Wirth and Lew had “a proven track record of success”, they added. “Execution won’t be easy, but these key individuals reduce some risk. We also like Myer’s refreshed strategy including the focus on higher-margin, differentiated, exclusive and private label brands.”
Myer previously announced that in the 22 weeks to December 28, total sales were approximately $1.59 billion, down 0.8% on the prior corresponding period.
Operating gross profit at Myer was approximately $560 million, down $15 million on the prior corresponding period while earnings before interest and taxes was approximately $48 million, a decrease of around $16 million.
Myer is set to release its half-year results next week.
