Department store operator Myer Holdings Ltd (ASX: MYR) held its AGM today and warned shareholders that trading conditions over November and leading into the critical Christmas shopping period remain challenging.
The group has already warned that same-store sales were down 2.1% for the 13 weeks to October 28 and today stated it has seen "no improvement" in the quarter ending December 31 2017.
Myer shares have lost 44% of their value over the past year as it suffers from the migration of consumer dollars online to e-commerce giants like Amazon, with the group today claiming that foot traffic in Australian shopping centres has been in consistent decline for the past 12 months.
It also claimed that "full service and discount department store sales growth weekend sharply in mid-2016 to decline for 11 of the past 16 months".
These tough retail conditions should serve as a warning to retail investors and have led to multiple profit downgrades across the sector from Myer itself, Baby Bunting Group Ltd (ASX: BBN) and Specialty Fashion Group Ltd (ASX: SFH).
Myer reported today that its online sales grew 41% in FY 2017 and online sales now represent 11% of total sales, although the main challenge for it remains resurrecting sales and profit growth at its department stores.
The decline in department store sales in the face of online competition is a global phenomenon with the US's Macy's losing half its value over the past year, while UK department store operator Debenhams PLC is down 68% over the past five years.
Many of Myer's problems are the legacy of years of underinvestment under its previous private equity owners TPG Capital though and shareholders have been left carrying the can ever since.
One angry shareholder is retail entrepreneur, Solomon Lew, who is reportedly agitating for a new management team at Myer after witnessing his investment in the business lose 40% of its value over the past year.
Lew invested in Myer via Premier Investments Limited (ASX: PMW) that has a cash rich balance sheet and also owns a substantial stake in Breville Group Ltd (ASX: BRG).
The billionaire is reportedly fuming about the fall in value of his Myer shares and even talked about being "misled" by Myer over his decision to invest.
It's reported that Lew will decide his next move after today's AGM, although he seems short of options other than to hold or sell unless he can gain sufficient shareholder support to force a change in management at the company. One alternative would be to launch a hostile takeover, although that seems unlikely despite the beaten-down valuation.
Investors looking for bargains in the beaten-down retail sector could consider RCG Corporation Ltd (ASX: RCG) at 75 cents it offers an 8 per cent yield and trades on 10x trailing earnings with prospects for low-to-mid single digit growth in the year ahead. As such I would rate its shares a buy under 75 cents and would not consider selling for less than 95 cents.
