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Highlights
- Sharp Declines in Stock Prices: Myer Holdings dropped 16% to 96 cents, while Premier Investments plunged 15% to $28.20 in morning trade.
- Challenging Retail Conditions: Both companies reported weak trading updates, citing macroeconomic pressures, cautious consumer spending, and declining earnings.
- Merger Vote Approaches: Shareholders are set to vote next week on a merger of Myer and Premier Investments' Apparel Brands, with both boards optimistic about potential synergies.
Shares of Myer Holdings Ltd (ASX:MYR) and Premier Investments Ltd (ASX:PMV) tumbled sharply on Monday, with both retail stocks trading deep in the red following the release of trading updates that painted a bleak picture of current retail conditions.
Myer’s shares fell 16% to 96 cents, while Premier Investments experienced a 15% drop to $28.20 during morning trade. The declines reflect investor concerns over weakening sales performance and profit forecasts amid a challenging economic environment.
Myer Holdings Update
Myer reported that group comparable sales for the 22 weeks ended December 28 remained flat compared to the same period last year, with total sales declining by 0.8% to approximately $1.592 billion. The retailer attributed part of this decline to the temporary closure of its Werribee store between February 14 and November 29, 2024.
Online sales offered a slight silver lining, growing by 2.8% and representing 22% of total sales during the period. However, earnings took a significant hit, with operating gross profit down 2.6% to $560 million and EBIT plunging 25% to $48 million.
Premier Investments Update
Premier Investments also reported a challenging first half, with total sales for its Premier Retail division expected to range between $855 million and $865 million, down from $879.5 million in the prior year. Earnings were notably impacted, with underlying EBIT projected to decline by 21.3% to 23.7% year-on-year, falling to a range of $160 million to $165 million compared to $209.8 million previously.
Management attributed the performance decline to cost-of-living pressures faced by consumers across all its global markets, leading to a heightened focus on value.
Merger Prospects
Despite weak trading updates, both Myer and Premier Investments are pushing forward with a proposed merger. Shareholders will vote next week on the potential integration of Myer with Premier Investments' Apparel Brands. Both boards have expressed optimism about the strategic and financial benefits of the merger, emphasizing synergies in supply chain, sourcing, property, and brand management.
Myer highlighted that the merger could bring a "step-change in Myer's market position," offering enhanced scale, diversification, and growth opportunities. Premier Investments' board has also unanimously recommended shareholders approve the merger, underscoring its potential to strengthen the companies' market standing amidst challenging retail conditions.
