Is Myer (ASX:MYR) a Buy After Profit Jumps 33%? The Margin Story Tells a Different Tale

Myer Lifts Profit 33%, But Margins Still Matter

Myer (ASX: MYR) spiked as high as A$0.34 in early trade on Monday after posting a 33% jump in net profit and declaring a fully franked dividend of 1.5 cents per share. But by the close, most of those gains had faded, with the stock finishing the day at A$0.305 before drifting lower on Tuesday and Wednesday as the market digested the margin compression beneath the headline numbers. With the stock now more than 64% below its 52-week high of A$0.815, the market remains unconvinced by the turnaround. The question this Wednesday is whether this result genuinely changes the investment case or whether the headline numbers are doing more heavy lifting than the underlying business deserves.

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What the Headline Numbers Don’t Tell You

On the surface, reported sales growing 24.5% to A$2.28 billion looks like strong momentum. The problem is that most of that growth came from folding in the Myer Apparel Brands acquisition, which added revenue that simply was not in the prior year comparison. When you strip that out and look at the business on a like-for-like basis, operating gross profit nudged up just 0.1% on a pro forma basis. That is essentially flat.

That distinction matters a lot for investors. A 0.1% improvement in gross profit, despite a larger store network and a bigger revenue base, tells us the core business is grinding forward rather than accelerating. The merger has made Myer look bigger on paper, but bigger does not automatically translate into more profitable. It is also worth noting that reported earnings per share actually fell 36% to A$0.023, because the Apparel Brands acquisition required issuing a large number of new shares, spreading the profit across many more slices.

There is one number in the results that genuinely impressed us. The cost of doing business came in at 27.9%, comfortably below management’s own FY2026 target of 29%. That is real discipline, and it shows the team is doing the hard work of tightening expenses. We believe this is meaningful progress. But one strong half on costs does not confirm a durable turnaround just yet.

Is the Transformation Actually Working?

To give Myer credit, the balance sheet is in good shape. Net cash of A$287 million gives the company breathing room that many struggling retailers would envy. The resumption of dividends, after skipping the final payment in FY25, signals management’s confidence that the business can sustain returns to shareholders again.

But the price action this week said something important. Investors initially cheered the headline numbers, then looked closer and pulled back. That pattern is often a sign that the result was good enough to get attention but not good enough to change minds. Adding to the caution, the trading update included in Monday’s results showed total sales up just 1.7% in the first seven weeks of 2H26. That is positive, but it reinforces the picture of a business that is recovering slowly rather than gaining real momentum. The uncertainty around consumer spending in Australia has not gone away.

The Investor’s Takeaway

The bull case here is real. The stock looks cheap at current levels, the dividend is back on the table, and cost management is clearly improving. For patient investors with a long time horizon, there is a credible recovery story to follow.

The bear case is equally real. Underlying profit growth is barely visible beneath the merger numbers, the 2H26 trading update points to modest rather than strong momentum, and a stock more than 64% off its highs does not typically recover in a straight line.

In our view, this result is encouraging but not yet convincing enough to step in. We want to see at least half of genuine profit improvement on a like-for-like basis before we become more confident. For investors already holding, staying patient seems reasonable. For those watching from the sidelines, waiting for clearer evidence of underlying margin growth remains the more sensible approach.