Myer Shares – Bargain Buy?

The plunge in Myer’s share price in recent months have many investors looking at adding Australia’s most well known fashion retailer to their portfolios. Currently trading at a share price of around $2, it certainly looks cheap when you consider that the company is expected to pay a fully franked dividend of $0.14 this financial year.  In addition to this, the retailer is scheduled to reopen a number of newly acquired and refurbished stores in the coming year.  This is expected to help increase revenue for the fashion giant.

However, to play devils advocate, what if it doesn’t?  Since its initial listing back in 2009, the company has struggled to increase operating revenue from its operations.  The firms current explanation of store closures for refurbishment may explain this years decline in operating revenue, but what about the other five year?

Earnings per share has decreased each year, and except for the marginal gain in 2013, the same is true for the firms operating revenue.  You have to ask yourself if perhaps there is a fundamental change in the market which is working against the retailer.

Myer's Operating Revenue and EPS
Myer’s Operating Revenue and EPS

I suspect that the popularity of online shopping has greatly eroded away the growth potential of the company.  Although I do believe the retailer has a solid customer base, it is failing to win the hearts of the more tech savvy and price sensitive working class that has emerged in recent years.  Online retailers are providing consistently higher quality products, many of which now rival if not outperforms what is being offered by Myer.  With express shipping, and free returns now becoming the norm for online retailers, you have to consider why customers would shop at Myer; and it certainly has nothing to do with their prices.


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