Myer Holdings Limited (ASX: MYR) is an upmarket Australian department store chain. Myer retails a broad range of produces across women’s, men’s, babies and children’s clothing, footwear and accessories. Myer has a market capitalisation of A$86.2 million.
Update on Coronavirus
The coronavirus (COVID-19) was first reported from the Wuhan province in China on 31 December 2019. The World Health Organisation data shows a total of confirmed cases of 634,835 and 29,957 deaths globally. As of today (30 March 2020), there have been over 4,093 confirmed cases and 8 have died of COVID-19 in Australia.
Update on share price
In the last month, Myer’s share price has fallen by 70% and is currently trading at A$0.11. The downward trend is due to the spread of COVID-19 and its impact on the retail industry operating in the discretionary spending part of the market.
What is Myer’s response to COVID-19
Due to the spread of COVID-19, it is apparent that the demand for retail services in the market that Myer operates has significantly weakening. Alongside the various measures undertaken by governments Myer will be implementing a range of practices to protect the health and wellbeing of customers, team members, their families and the broader community. As such, Myer will close all stores from close of business on Sunday (29 March 2020), for an initial period of four weeks until 27 April 2020.
Additionally, Myer will be implementing a range of necessary measures to minimise cost base, including engaging in ongoing discussions with suppliers and landlords. As of today (30 March 2020), Myer announced that it will stand down approximately 10,000 employees across the store network to minimise costs. However, a small group of business-critical roles will be maintained to undertake essential work during this period and to support Myer’s online business model.
What is the outlook for Myer?
Despite the temporary closure of all Myer Stores across Australia, Myer will continue to operate all online businesses. As reported on Myer’s HY2020 results, Myer’s online sales are up 25% to A$168.2 million when compared to 1H19, representing 10.5% of total sales. To complement the online business model, Myer will reduce the threshold for free delivery to A$49 per order and relax the returns policy to stimulate consumer purchases.
In its HY20 results, Myer reported operating cash flow decreased by A$8 million when compared to 1H19, while total net cash at the end of HY20 increased by A$65 million to A$103 million compared to 1H19. Needlessly to say, there is a significant risk that Myer may not survive in its current form once the COVID-19 issues subside. Investors could closely follow Myer in the coming months to see how the company fairs during this outbreak. Myer is trading at a forward P/E ratio of around 3x earnings.
This article has been prepared by the Australian Stock Report Pty Ltd (AFSL: 301 682. ABN: 94 106 863 978)
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