Morgan Stanley has reaffirmed its ‘overweight’ rating for Myer, despite a substantial decrease in the department store group’s net profit. Myer reported a 30 per cent slump in net profit, falling to $36.8 million. Subsequently, Morgan Stanley has lowered its short-term share price target by 23 per cent to 77¢.
Despite this reduction, the current share price could imply significant underlying growth. Myer shares experienced a sharp decline, plummeting as much as 29 per cent to 45¢ on Tuesday, hitting their lowest level in over three years before recovering slightly to close at 48¢. Myer is an Australian department store chain offering a wide range of products, including apparel, cosmetics, homewares, and electrical goods. The company operates numerous stores across Australia and also has an online presence.
The profit slump was attributed to issues with Myer’s new distribution centre and disappointing sales from its Apparel Brands portfolio. The portfolio was acquired from billionaire Solomon Lew in January, and has since weighed heavily on overall earnings, according to Tuesday’s report.
Morgan Stanley equity analyst Julia de Sterke stated, ‘We maintain an overweight rating in view of the strategy reset and turnaround opportunity from Apparel Brands integration, loyalty and efficiency improvements, with the potential to meaningfully improve EBIT margins.’ This indicates continued confidence in Myer’s long-term prospects despite the recent financial setbacks.
