Myer (ASX:MYR): Investors hated its FY25 results with a passion, but the company is optimistic better times are ahead

Myer (ASX:MYR) made headlines earlier this week after its FY25 results – shares fell >25%. Were results that bad? Maybe not that bad, but they manifested problems investors arguably thought either weren’t as bad or closer to a resolution than they previously envisioned.

What are the Best ASX Stocks to invest in right now?

Check our buy/sell tips

The history of Myer (all downhill since 1983)

Myer is named after its founder Sidney Myer who arrived from Australia at the turn of the 20th century, opening his first store with his brother Elcon in Bendigo. The company’s flagship store in Melbourne first opened in 1911. The company expanded over the decades and became Australia’s largest department store chain. In 1983, it merged with Coles, creating Coles Myer and that was the end of the glory days. Even though Myer itself remained a premium department store and had success, the group struggled with internal competitions (i.e. between its own brands) and strategic misalignment. A divorce occured in 2006 when Myer was sold to Newbridge Capital and Coles to Wesfarmers.

The company re-listed in 2009 when its then owners wanted to cash out and thought it was easier to sell to retail investors who wouldn’t ask why they were selling. While those investors (Blum and TPG) made 6 times their initial investment, retail investors were not so lucky. The company IPO’d at $4.10 and bottomed out at 19c in 2020. It was hit by the decline of brick and mortar retail generally, profit downgrades, Solomon Lew’s investor activism and continual replacement of turnaround plans.

Hope for the future?

There had been some hope for the future. After years of denial, Myer faced up to the future and took steps to rationalise its store network and adapt to the eCommerce era. Current CEO is Olivia Wirth who used to be the boss of Qantas Loyalty but left the company after Vanessa Hudson was picked instead of her to succeed Alan Joyce. In late 2024, it announced a merger with Apparel Brands which would bring retail brands. Just Jeans, Jay Jays, Portmans, Dotti and Jacqui E under its fold, and likely get Solomon Lew to tone down his activism.

About this time, Myer released its FY24 results. Its sales were flat, up 0.4% on a ‘comparable’ basis but down 2.9% on a group-wide basis by virtue of store closures. Its profit was $52.6m, down from $71.1m the year before, but the company boasted that it had 10.4m loyalty program members, 706k of which only joined that year and over 50% of those were under 35. How many loyalty members were active? 4.4m (up 4.8%). Shares peaked at over $1.20 in late 2024 – well below the IPO price, but multiple times ahead of where shares bottomed out amidst the pandemic.

The company’s FY25 results were not liked

Myer shares shed over 25% of their value earlier this week upon the company’s FY25 results. Total sales growth was 0.5% on a pro forma basis, but this reflected contributions from Apparel Brands. The company’s top and bottom lines were hit by soft economic conditions. It was not uniform across the group – Home brand sales grew 7.4% while womenswear and kidswear fell 1.0% and 1.7% respectively while menswear was flat. Turning to Apparel Brands, Portmans was the best with 1.3% sales growth – and in fact, the only one to record any growth – but Dotti fell 8.9%.

Myer’s Group EBIT line was 13.8% lower, the company’s underlying profit was $36.8m but $211.2m in the red on a statutory basis arising from a $313.3m non-cash impairment of Apparel Brands good will. This is due to accounting standards requiring the purchase consideration to be valued using the closing share price at the acquisition date and this was lower than when the deal was first announced. Despite paying a dividend for the first half of the year, and claiming 3.1% sales growth in the first seven weeks of FY26, the company opted not to pay a final dividend.

It’s more than just the economy…

Myer reported challenges at its new National Distribution Centre (NDC) as well as rising incidents at its Victorian stores – theft and antisocial behaviour (did you know there was a 79% hike in ‘incidents of threatening behaviour’ leading to a $4m increase in security costs?). But the problems with the NDC aren’t as easy as hiring security.

As one media outlet put it,’ the computer system that runs the warehouse is not talking to the robots that carry stock around’, and these problems have been going on for once. So Myer has had to compile some online orders in its stores which has increased costs and led to incidents such as one particular customer ordering six things in one order but all of them arriving in different boxes.

Myer has tried to persuade investors things will get better. Initiatives announced included plans to relaunch its loyalty program, partner with Velocity and manage increasing costs across the business with a Value Creation Program. And in relation to its NDC, a new third-party warehouse will operate for the holiday shopping season, at a cost of $32m and will implement longer-term solutions for the NDC over the next 12 months. Of course, it can only do so much about the situation in Victoria, but we’ll leave it at that.

A bet in Myer would be a bold one, but not one we’re willing to make

Consensus estimates have an $0.87 mean target price which suggests over 80% upside. They also call for growth in FY26, with 14% sales growth (to $4.2bn), 32% EBITDA growth (to $507.9m) but a flat profit. Its multiples are 4.5x EV/EBITDA, 12.4x P/E and 0.4x PEG. These may appear compelling, but perhaps the saying you get what you pay for is applicable here.

The very reason shares fell after the result was because many investors and analysts were ‘caught napping’ in that they didn’t realise some of Myer’s problems were as bad as they are. The retail space is tough even at the best of times, and we would rather stick with companies already thriving such as Universal Store (ASX:UNI) and Coles (ASX:COL). Things with Myer could get worse before they get better, or may not get better for some months yet.