Myer Holdings (MYR) – Costs squeeze

Myer Holdings operates department stores in Australia and New Zealand and also has an online division. The company was founded in 1900 and is based in Docklands, Australia.

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Myer posted FY25 net profit of $36.8 million, well short of market and Ord Minnett expectations, and did not declare a final dividend, as surprisingly high costs of doing business (CODB) for the department store chain erased any benefit from a rebound in like-for-like (LFL) sales growth in the second half. The retailer warned that CODB pressures had continued into FY26 although sales in the first seven weeks of the period were up 3.1% on a year ago, ahead of consensus and Ord Minnett forecasts for the first half of FY26. Ord Minnett notes company guidance for a lower CODB margin in FY26 of 29– 30% indicates CODB are set to increase again, as Myer fully beds down the Apparel Brands business it acquired from Solomon Lew’s Premier Investments (PMV) and funds growth initiatives and support office capability. We estimate the step up in CODB in FY26 will be embedded in its cost structure at circa $15–-20 million on an annualised basis rather than being just a short-term hit.

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Also muddying the costs picture are the well-flagged problems with its national distribution centre (NDC) in Victoria, which Myer said carved $16 million from the earnings before interest tax (EBIT) line in FY25, although the company said it has engaged a third-party logistics operator to support the crucial Christmas trading period. The company will also spend $32 million to implement a permanent fix for the troubled facility, with completion expected in FY27, and the retailer is aiming for $20 million in annual benefits from a fully functioning NDC from then on. Post the result, we have made deep cuts to our EPS forecasts– by 30.1%, 20.7% and 14.4% for FY26, FY27 and FY28, respectively, which leads us to reduce our target price to $0.67 from $0.86.

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There is apparent value in Myer but there are also significant risks from the Apparel Brands integration and the retailer faces a difficult task in growing LFL sales on a sustainable basis. Given this view, we cut our recommendation to Hold from Accumulate.

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