Myer Holdings (MYR) – Outlook only getting tougher

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. Myer Holdings (MYR) delivered a weak trading update as the department store and apparel chain warned operating gross profit for FY26 would be down 2.1–2.5% on a pro forma basis, as soft consumer sentiment weighed on sales and increased promotional expenses to spur demand squeezed margins. The worse-than-feared update sent Myer shares down 12% on the day.

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The hit to demand from households hurt by higher interest rates and petrol prices was exacerbated by the warmer-than-typical winter, with total sales of $4.1 billion up just 0.3% on a comparable basis. Somewhat concerningly, Ord Minnett notes the slowdown accelerated in the second half of FY26 (Myer rules its books off in July), with comparable total sales falling 2.1% in the last 19 weeks, including a drop of 5.4% and 4.0% in June and July, respectively. The weakness was across Myer’s legacy operations and the Apparel Brands business acquired in FY25 from Premier Investments (PMV), a vehicle of Myer’s major shareholder Solomon Lew. Looking into the first half of FY27, we expect continued weak consumer confidence and a likely further 25 basis point increase in interest rates to drive a 1.5% fall in total sales.

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Even the positive point from the trading update, i.e. the ratio of costs-of-doing-business (CODB) to sales of 29% that met the company’s target, appears at risk, as weaker sales and the erosion by inflation of targeted synergies from the acquisition of Apparel Brands make operational deleverage a real prospect. Post the update, we have cut our EPS estimates by 39.0%, 52.6% and 32.4% for FY26 (the company reports its formal full-year results in September), FY27 and FY28, respectively, which leads Ord Minnett to cut its target price to $0.24 from $0.32.

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We maintain our Hold recommendation on Myer despite the apparent value on offer, given the major structural changes to the retail industry over the past decade that have disrupted the traditional department store business model and specific execution risks around Myer’s troubled national distribution centre project.