Myer’s Makeover Mission

This story features PREMIER INVESTMENTS LIMITED.
For more info SHARE ANALYSIS: PMV
The company is included in ASX200, ASX300 and ALL-ORDS

Preceded by a disappointing trading update in the days prior, Myer’s investor strategy day highlighted multiple new initiatives and potential sources of growth.

-Myer’s strategy day highlights management’s focus on ‘execution over targets’
-Retailer laid out ambitious three-to-five-year roadmap
-Margin pressure, cost of doing business dominate trading update
-Synergies from Apparel Brands on track

By Mark Woodruff 

During retailer Myer’s ((MYR) investor strategy day in late May, its first since 2017, Executive Chair Olivia Wirth pulled no punches, declaring the era of empty promises over. The new mantra? Execution over targets.

The retailer laid out an ambitious three-to-five-year roadmap spanning loyalty schemes, private label refreshes, omni-channel investment, and a full supply chain overhaul.

Analysts saw much to like, but also flagged clear execution risks. A lot of heavy lifting remains to be done.

Key takeaways differed. Petra Capital is most upbeat about opportunities within sourcing & supply chain, while Morgan Stanley highlights progress being made on the Myer Exclusive Brands/Owned Brands portfolios.

Following interim results in March, analysts felt the investment case for Myer depended on the success of integrating the Apparel Brands’ assets from Premier Investments ((PMV)) and executing a successful turnaround.

Premier swapped its non-core Apparel Brands for shares in Myer valued at $864m, in a transaction completed in January.

The acquired brands are now available via myer.com.au providing Myer with scope for revenue synergies through cross-shopping opportunities with Apparel Brands customers and ecommerce upselling.

Myer operates 56 department stores across Australia along with a significant online business (myer.com.au). The group also owns specialty fashion brands such as sass & bide, Marcs, and David Lawrence, and runs one of the country’s largest loyalty programs, Myer one.

Trading update

Management at the time of interim results stressed a ‘reset’ was underway to position Myer for future growth. The focus was on completing the team build-out and executing revenue synergies, with further details then expected at the company’s May strategy day.

Just a few business days before that marker, management issued an unaudited trading update for the first 16 weeks of the second half.

Unfortunately, the update referenced margin pressure from heightened promotional activity across the broader retail sector, increased costs of doing business (in particular, store wages and occupancy outgoing costs impacted by inflation, as well as investment in additional leadership capabilities) as well as unfavourable currency movements.

Investor strategy day

After attending the investor strategy day, Morgan Stanley feels Myer is making tangible progress on its turnaround ambition, particularly in the integration of the Apparel Brands portfolio.

It remains early days, cautions the broker, with execution risk elevated due to the complexity and the number of moving parts involved.

That said, Myer articulated a clear strategic roadmap, in the broker’s view, supported by a capable leadership team committed to delivery. Encouragingly, synergy targets appear to be tracking ahead of expectations, with management expecting over $30m by the end of FY26.

Canaccord sees $30m as achievable, partly due to opportunities for leveraging the Myer one loyalty plan, while Morgan Stanley sees further upside potential as integration efforts gain momentum.

Management also noted increased costs relating for ramp-up and remediation at the new National Distribution Centre (NDC) in Victoria. Work is proceeding on ways to solve the automation and integration ramp-up issues, but in the meantime, Myer has developed an interim solution.

Myer’s total sales were running comfortably ahead of the forecast at Canaccord Genuity, yet cost pressures proved worse-than-expected. While Apparel Brands sales improved since last reported figures, but they remained in negative territory.

Over 16 weeks, sales for Myer and Apparel Brands were $837.2m and $211.2m, a respective beat and miss of 1.9% and -3.7%, compared to the prior year.

Loyalty program

With 4.6m active members spending nearly three times more than non-members, Myer’s loyalty program is a hidden gem.

A relaunch of Myer one in October will bring tailored offers, notes Morgan Stanley, with a focus on delivering more personalised offers aimed at increasing customer visit frequency and transaction value.

Beyond customer engagement, the program will also serve as a strategic data asset, explains the broker, enabling data-driven decision-making across the business, spanning brand curation to store layout optimisation.

Both operational efficiency and the customer experience are expected to improve.

Areas of improvement

Management is focused on re-engaging the under-30s demographic in Product & Myer brands, an area where Myer is currently underpenetrated, notes Morgan Stanley. A key initiative involves streamlining the apparel private label portfolio to eliminate brand duplication, enhance clarity, and drive stronger customer resonance.

Canaccord highlights the retirement of six underperforming brands and the transition of five brands to dual-gender offerings, reflecting a more streamlined and inclusive approach. New ranges from these revitalised brands are expected to launch by February 2026.

Such progress across Myer’s Exclusive and Owned Brands portfolios reinforces the company’s multi-brand strategy and its potential to drive margin expansion and differentiation, notes the analyst.

Importantly, strong execution could deliver a meaningful uplift in gross margins, with Canaccord noting potential improvements of up to 400 basis points in womenswear and 450 basis points in menswear.

These gains precede any benefit from the integration of Apparel Brands, which is expected to further enhance sourcing efficiency. With only circa 5% overlap across 332 suppliers, the combined business has significant scope to streamline the supplier base, renegotiate commercial terms, and align sourcing strategies more effectively.

Myer also anticipates leveraging its greater scale and purchasing power, particularly in high-volume categories such as denim and fabric. These efforts are well supported by favourable macro-economic tailwinds, including falling fabric input costs and emerging cost advantages in Chinese manufacturing hubs.

As foreshadowed at interim results, the year-to-date performance was negatively impacted by a sales mix shift to concession. That is, a larger proportion of in-store sales now come from third-party brands operating their own “store within a store” spaces, rather than from Myer’s own inventory or exclusive brands. 

Despite the negative mix shift, management re-affirmed concessions remain a critical pillar of the business model. According to Canaccord, these concessions are key drivers of both store traffic and sales, particularly given that many feature fashion-forward, globally recognised brands known for innovation and consumer appeal.

Looking ahead, the analyst understands new concession brands are set to launch in the near term, enhancing the overall in-store offering. Additionally, selected ranges from Apparel Brands will be introduced into Myer stores where strategically appropriate, supporting product diversification and category strength.

Canaccord anticipates early wins from synergies through the first half of FY26 from sources including materials (denim, linens), suppliers/factories, sorting (direct versus intermediary facility), or long lead times.

Outlook

There are two daily covered brokers in the FNArena database conducting research on Myer, but only one, Overweight-rated Morgan Stanley (target $1.05), has refreshed its views since the investor day. Ord Minnett (Accumulate, one notch below Buy; target 86 cents) last updated on 20 March.

The average target of 95.5 cents suggests 46.9% upside to Friday’s closing price of 65c.

Outside of daily coverage, Petra Capital and Canaccord Genuity both have Buy ratings with respective targets of 90 cents and $1.05.

Find out why FNArena subscribers like the service so much: “Your Feedback (Thank You)” – Warning this story contains unashamedly positive feedback on the service provided.

FNArena is proud about its track record and past achievements: Ten Years On

Click to view our Glossary of Financial Terms