If you're ever out shopping and want to escape the crowds a good tip is to head into a department store operated by Myer Holdings Ltd (ASX: MYR).
The struggling department store has been unable to shake that empty feeling in recent years and this week announced a full year net profit of $77.5 million, down 21.3% on the prior period.
This week the retailer announced a turnaround strategy christened 'New Myer', which aims to re-invent the in-store experience and promote popular brands like UK fast-fashion hit TopShop.
Grand strategies on paper are all well and good, but executing on them is what counts and projected full year profit in the current year is expected to slide around 10% to between $64 million to $72 million.
This is before strategy implementation costs forecast between $35 million and $45 million, which will be a major dent in the actual bottom line.
Myer has also announced it plans to raise $221 million to help fund its transformation by issuing new scrip on a 2 for 5 basis to institutional and retail investors at 94 cents per share.
The stock has plunged around 23% since the announcement and today's price of 92 cents is below the price at which shareholders are being asked to pay for new scrip.
Naturally, retail investors are unlikely to pay a premium for a dilutive capital raising offered above the exchange traded price, with Myer and its capital markets advisors left shopping for answers.
The Fairfax press has reported that Goldman Sachs are fully underwriting the capital raising, which means they will be obliged to take the slack on any stock not taken up. Goldmans also likely advised Myer on the pricing and structure of the capital raising and the current situation is not a good look for the investment bank.
In fairness the department store's problems stretch back over many years of underinvestment at the hands of its previous private equity owners and then its former CEO Bernie Brooks.
Myer also faces increased competition from overseas rivals, digital disruption and general sartorial trends among the youth market in particular away from mainstream apparel retailers.
Overall, the group's multiple problems mean it looks to have more baggage than Louis Vuitton and despite the cheap share price betting on turnaround businesses seldom works out well for investors.
Other retailers to have struggled recently include Kathmandu Holdings Ltd (ASX: KMD) and OrotonGroup Limited (ASX: ORL), while the exception to the rule could be the recently rising Pacific Brands Limited (ASX: PBG). However being in the socks and jocks business Pacific Brands has the advantage of its products being less discretionary in nature than those sold by other retailers hoping to halt declining profits.
Myer stock is down 62% over the past year and you don't need to be Coco Chanel to appreciate it looks to be falling out of fashion…
So why not consider buying some of the stocks below instead…
