Both Myer and Premier Investments have recorded double-digit percentage drops in their share prices on Monday following the release of their respective trading updates.
By close of trade yesterday, Premier’s shares fell almost 16 per cent to $27.78, while Myer’s share price fell 23 per cent to 88 cents. Myer has slipped further to 83 cents on Tuesday morning, while Premier is down to $26.69.
Analysts at Goldman Sachs weighed in on Premier’s “worse than expected” trading update for the first-half of FY25, telling investors in a note that the investment bank has cut its FY25-27 group sales estimates for Premier by 4 per cent and its earnings forecast by around 18 per cent.
“While we have previously been cautious on the outlook of Apparel Brands with structurally challenged growth, we were surprised by the material decline in both sales and EBIT for PA/Smiggle,” Goldman Sachs analysts wrote.
“Assuming a small impact on GPM, it signals noticeable operating deleverage in CODB (mainly labour and rent), which calls into question 1) cyclical or structural component of PA/Smiggle sales decline; and 2) further deleverage if sales are not restored and/or dis-synergies if Apparel Brands and Myer merger moves forward (we do not take a view or currently reflect in our forecasts).”
From its updated FY25 earnings base, the analysts are forecasting that Peter Alexander will recover around 8 per cent in revenue/EBIT over a 2-year compound annual growth rate to FY27e from improved domestic spending and UK expansion. Meanwhile, Smiggle is expected to recover by around 4 per cent sales and around 4.5 per cent for EBIT, largely driven from global point of sale penetration.
But other analysts are not as pessimistic, with researchers at BofA Securities reiterating a buy rating, with a price target of $30.30.
In BofA Securities' note to investors, it reiterated that Premier is projecting a first-half EBIT that could be around $45-$50 million below what the retail business achieved in the first half of FY24, hitting somewhere in the range of $160 million to $165 million.
The group's five apparel brands - that being Just Jeans, Jay Jays, Jacqui E, Dotti and Portmans - is expected to deliver around $20 million less in EBIT than it delivered in 1HFY24, with BofA securities suspecting that the other contributor to the weaker first-half EBIT is Premier's accessories brand Smiggle - "notably in offshore markets".
"Peter Alexander looks to be performing in line with our expectations (continued growth) which we view positively," BofA research analysts wrote.
"We remain positive on PMV due to its strong retail execution and leverage to improve earnings when economic conditions get better. Peter Alexander also looks to be a world class business that can grow earnings regardless of the economic environment."
Meanwhile, Myer recorded a 0.8 per cent fall in sales for financial year to December 28, bolstered by a 2.8 per cent lift in group online sales.
The department store’s operating gross profit was down by $15 million to $560 million, with EBIT down by $16 million to $48 million..
Myer cited a tough macroeconomic market for the fall, alongside increased costs and ramp-up complexity at its new National Distribution Centre in Ravenhall, which has delayed the realisation of expected benefits.
“In challenging trading conditions for the retail sector driven by a tough macroeconomic environment, Myer’s year-to-date sales performance has been stable,” Myer executive chair Olivia Wirth said.
“Trading during last year’s key sales events including Black Friday was strong, but consumers remain cautious and focused on value given persistent cost-of-living pressures.
“Despite the challenging trading environment, I am pleased to report that we continue to record solid growth in our market-leading MYER one loyalty program.”
The share price plummets for both businesses come ahead of a proposed combination between Myer and Premier’s Apparel Brands, with independent directors at both entities unanimously supporting the deal and calling for shareholders to do the same.