Beleaguered department store chain Myer Holdings Ltd (ASX: MYR) has made new 52-week lows of 63 cents in morning trade following a raft of broker downgrades after yesterday's underwhelming Q2 trading update.
Yesterday's announcement revealed that sales and profit have weakened further in recent weeks following a soft first quarter performance. In light of the current trading environment, management now expects a profit shortfall that is unlikely to be filled for the rest of the first half.
Myer's investments in promotional campaigns and initiatives to drive traffic through its store have not been rewarded.
Total sales to the November month end were down 2.3% and 1.8% for comparable store sales on the prior corresponding period.
The first 2 weeks of December trade and the all important Christmas period have fared even worse, with sales down 5% on the prior corresponding period. The company now expects first half NPAT to be materially below the prior corresponding period.
A number of brokers have issued notes this morning following yesterday's trading update reducing their price targets for the stock.
- Credit Suisse cut its price target by 16% to 56 cents.
- Deutsche Bank cut its price target by 13% to 65 cents.
- UBS cut its price target by 7.7% to 60 cents.
- Citi cut its price target by 8.3% to 66 cents.
Foolish takeaway
2017 has been a difficult year for retailers with numerous high profile retailers such as Oroton Group Limited (ASX: ORL), Marcs, David Lawrence, Herringbone and Rhodes and Beckett all placed into administration.
The Amazon effect has seen a substantial amount of shorters in Harvey Norman Holdings Limited (ASX: HVN) and JB Hi-Fi Limited (ASX: JBH) profit from their share price declines as the market prices in Amazon's disruption.
The traditional department store model continues to suffer from lower foot traffic, widespread discounting and increased competition from online retailers with lower costs of doing business.
While Myer has seen growth in online sales it has not been enough to offset the decline in its bricks-&-mortar stores. With store closures already announced and a possibility of further closures, shrinking revenues and margins, it's difficult to see a compelling bullish case for Myer.
