Myer: AGM 2016
Recommendation
At today's annual general meeting, department store group Myer Holdings announced that same-store sales for the first quarter rose 3.9%. Improved sales results for the quarter should have been no great surprise because, in preparation for the introduction of new brands, the company conducted a 'Spring Clean' clearance sale in August.
Nevertheless, it is a mark of just how low investor expectations are that today's middling news was greeted with a 5% jump in the Myer share price. This company is the antithesis of a market darling.
It's very early days in the turnaround and management has a lot of hard work ahead. While the company confirmed its guidance of a $64m-$72m net profit for 2016 (before New Myer implementation costs), much will depend on Christmas trading.
Many retailers prefer to err on the side of caution given the importance of Christmas, although we'll forgive Myer's management any schadenfreude from children crying in front of David Jones' window displays.
Myer's share price may well be volatile, particularly given it is one of the most shorted stocks on the ASX. So today's share price jump on higher than average volume may simply be short sellers covering their positions.
The stock has now risen above the $1.00 price limit we specified in Is Myer still a pariah? from 11 Nov 15 (Speculative Buy – $0.943). While the stock remains significantly underpriced, we're reluctant to chase it given the risks. We'll downgrade to Hold if it continues to rise but for now the recommendation remains SPECULATIVE BUY for up to 2% of your portfolio.