Myer’s share price has plunged by around 45 per cent since its peak in late December last year, but financial analysts remain hopeful that it could swing back towards those recent highs.
In separate notes to investors, Morgan Stanley and Canaccord Genuity analysts projected that Myer’s current share price of $0.68 per share (as of publishing) could swing back above $1.00 per share.
Both notes were sent out after Myer (ASX:MYR) shared its half year trading results to the market on March 19 last week, with Morgan Stanley swiftly updating its $1.10 projection shared the day before (March 18) to $1.05 just hours after Myer’s trading update.
Canaccord Genuity is projecting a target price of $1.15, shared in a note on March 20.
Both projections are still relatively below Myer’s recent peak in late December, which then hit as high as $1.26 per share on December 27.
According to Canaccord Genuity’s note to investors, Myer’s first half result printed slightly better than what they were looking for, implying strong January clearance execution.
Myer reported flat total sales for the first half of FY25, up by just $2 million to $1.831 billion compared to the same time last financial year.
The sales growth was adversely impacted by implementation issues at the retailer’s national distribution centre (NDC) which launched operationally in Ravenhall, Victoria in August last year. Myer confirmed that the NDC is not yet operating as designed.
Canaccord Genuity shared that the flat comparable sales and the 4 per cent slip in underlying earnings before interest and tax (EBIT) from NDC challenges were “solid outcomes” in the current macro context. Myer's overall EBIT was down 14 per cent to $102 million.
“Management stressed there is a 'reset' underway to position the company for future growth,” the note read. “Much of near-term execution remains cost focused. Ample colour has been provided as to quantum, and in some instances (finance costs, Sass & Bide, Marcs and David Lawrence turnaround) it has committed to timeframes.”
From this, Canaccord Genuity deemed Myer’s brand health factors to be pointing in the right direction, particularly the 6 per cent lift in active members, the Myer One loyalty program tag rate at record levels, and new member sign-ups surging by 21 per cent.
They add that there is scope to drive revenue synergies from cross-shop – following Myer’s acquisition of the Just Group brands, Just Jeans, Jay Jays, Jacqui E, Dotti and Portmans – and eCommerce upsell, with the Just Group product ranges likely being made available through the Myer website.
“A stronger consumer/macro backdrop is not a core driver of our medium-term forecasting but feasibly could be materially additive to earnings growth.”
As a final say, Canaccord Genuity analysts said that while its divisional estimates are lower for the second half, it is largely to account for higher employee costs vs prior thinking as well as other items relating to NDC and the performance turnaround timing of Sass & Bide, Marcs and David Lawrence.
Meanwhile, in its revised note to investors following Myer’s half year trading update, Morgan Stanley analysts reported that trading remains volatile, compounded by those distribution centre issues.
Despite this, the Myer turnaround and the integration of the five new Just Group brands are coming together, with earnings-per-share upside risk from synergies -- for example: debt refinancing and specialty brand cost-out.
“Execution risk is high, but we think risk/reward is attractive,” Morgan Stanley’s note read.
Morgan Stanley claimed the key factors they’ll be watching ahead include a synergy target upside, with Myer reaffirming its target of at least $30 million in earnings pre-tax per annum over the short to medium term.
Myer expects to generate around $11 million in finance cost savings per annum from FY26, after refinancing its debt.
“The company also identified a A$10m EBIT benefit from FY26 related to restructuring the specialty brands (e.g., Sass & Bide). We don’t believe this is included in the initial synergy target,” the analysts wrote. “We see further upside from loyalty, sourcing, store consolidation, cost efficiencies, etc., which is not captured in our forecasts.”
Another possible material factor for Morgan Stanley analysts is capital management optionality, with Myer’s net cash at $219 million as of January 25, 2025. According to analysts, the net cash can be used to accelerate organic growth such as store refurbishments, as well as inorganic growth and/or returning to shareholders.
The final factor that Morgan Stanley analysts are keeping in mind is cyclical tailwinds from interest rate/tax cuts.
“The timing and quantum of a consumer recovery is difficult to predict; however, we think the cycle will turn at some point, providing upside earnings risk,” the analysts wrote.