Myer chief scoops up shares after profit dives

Myer shares plumbed record lows on Friday as chief executive John King shelled out $33,000 to scoop up 100,000 shares.

Myer CEO John King. Picture: Stefan Postles

Myer shares plumbed record lows on Friday but the malaise gripping the retail sector didn't stop its chief executive John King from shelling out $33,000 to scoop up 100,000 shares in the retailer after he delivered the company’s latest interim financial results.

On Thursday Myer reported another slump in its profitability, posting a 36.5 per cent retreat in interim net profit to $24.4m, driven by post-tax impairments and charges of $13.4m.

Its net profit before impairments fell 4 per cent to $39.6m, while pre-tax earnings lifted 1.2 per cent to $64.5m.

Shares in Myer dropped sharply on Friday, in line with much of the broader sharemarket, with shares in the struggling department store ending down 5.5c, or 16.7 per cent, at 27.5c — a record low. Myer shares have fallen almost 50 per cent since the beginning of the year.

After Myer reported its latest financial results Mr King waded into the market, buying 100,000 shares for 33c each.

He is already under water on the recent purchase, sharing the pain of other investors.

Citi analyst Bryan Raymond has retained his “buy” rating for the stock despite the poor outlook for the department store, saying the low expectations for the company are already built into its share price.

But the retailer will face pressure on its ability to spend on the in-store experience, which is key to attracting customers and store traffic.

“We see pressure building for Myer, particularly in-store, as covenants do not provide room for meaningful investment in service levels and traffic remains poor,” Mr Raymond said.

“Nevertheless, the market is pricing in forecasts well below consensus, reflecting these risks in the share price.”

Citi has reduced its target price to 50c.

UBS analyst Aryan Norozi has also retained his “buy” recommendation on Myer, which faces structural challenges in the retail space as the coronavirus hits consumer spending.

“We acknowledge near-term risks from coronavirus, demand and supply, but these are transitory and have been priced in,” Mr Norozi said.

“While structurally challenged, we have a ‘buy’ on Myer for three reasons: profit under­stating cash-generation; near-term cost-out opportunities exist, with a more than $15m rental saving opportunity from space rationalisation, and stemming like-for-like sales decline at ­higher gross margins via new brands, refurbs and reduced discounting.”