Myer’s Profit Decline Highlights Risks Ahead of Merger Vote

Trading Update Overview

Myer Holdings Limited (ASX: MYR) has released a preliminary trading update covering the 22 weeks ended 28 December 2024, revealing a mixed performance amid ongoing macroeconomic headwinds. The department store giant reported group comparable sales holding steady compared to the prior corresponding period (PCP), while total sales slipped by 0.8% to approximately $1.592 billion. This slight decline was notably influenced by the extended temporary closure of the Werribee store from mid-February to late November 2024.

Despite these challenges, Myer’s online sales demonstrated resilience, increasing by 2.8% year-on-year and now accounting for 22% of total sales. This growth underscores the retailer’s continued digital traction in a competitive market.

Profitability and Operational Challenges

Operating gross profit fell by around $15 million to $560 million, while earnings before interest and tax (EBIT) on a pre-AASB16 basis declined by approximately $16 million to $48 million. Myer attributed these decreases partly to the complexities and increased costs associated with ramping up its new National Distribution Centre in Ravenhall, which has delayed the anticipated operational efficiencies and cost savings.

Executive Chair Olivia Wirth acknowledged the tough trading environment, noting that consumers remain cautious and value-conscious amid persistent cost-of-living pressures. She highlighted that while key sales events like Black Friday performed strongly, the overall market conditions continue to challenge retail growth.

Strategic Merger with Premier Investments

In a significant strategic development, Myer reaffirmed its commitment to the proposed combination with Premier Investments Ltd’s Apparel Brands business. The merger, announced in October 2024, aims to create a more diversified retail group with enhanced scale, revenue opportunities, and cost synergies across supply chain, sourcing, property, and brand management.

The merger requires shareholder approval, with an Extraordinary General Meeting scheduled for 23 January 2025. Myer’s independent directors unanimously support the deal and recommend shareholders vote in favor, contingent on the Independent Expert’s assessment that the combination is fair or reasonable.

This proposed combination comes at a time when Premier Investments itself has reported challenging trading conditions, underscoring the broader retail sector pressures. Yet, Myer sees the merger as a transformative opportunity to strengthen its market position and drive future growth.

Looking Ahead

Myer’s half-year reporting period concludes on 25 January 2025, with interim results expected in March. Investors will be watching closely for confirmation of the preliminary trends and further insights into the integration progress of the new distribution centre and the potential impact of the merger.

Meanwhile, the company continues to grow its MYER one loyalty program, which remains a bright spot amid the cautious consumer environment.