Shares of department store chain Myer (ASX: MYR) have fallen about 7% this week, as the company released data on its most recent quarter. By way of comparison, the S&P/ASX 200 index (Index: ^AXJO) (ASX: XJO) has fallen around 2%. What's behind this significant dip?
Anaemic third quarter growth and outlook
Myer sales for the 13-week period amounted to $652.5 million an increase of less than one percent on sales in the third quarter of 2012. On a like for like basis — excluding results from new stores — sales grew by 0.4%, marking the fourth consecutive quarter of growth for Myer. The company opened one new store during the period, in Shellharbour, New South Wales, and three of its best-performing stores are currently being refurbished.
The retailer also moved to enhance its loyalty program, a key strategic objective, by launching a new "premium platinum tier" for 2,000 Myer one members. These customers are to receive "exclusive rewards and experiences".
Chief exec Bernie Brooks gave an overall cautious outlook and said the company would continue to focus on strategic initiatives including "building a leading omni-channel offer".
Market bearish. What about competitors?
With the price fall this week, Myer shares are trading for a little over 10 times earnings and less than one times sales. The read is: Mr. Market is fairly bearish on this company's prospects.
Competitor David Jones (ASX: DJS), for its part, is trading for 16 times earnings, but has a significantly smaller debt load, while Premier Investments (ASX: PMV) has a strong net cash position, is diversified across a number of retail concepts, and trades for less than 16 times earnings.
The takeaway for investors
A good deal of pessimism is baked into Myer's share price just now, reflecting widespread concerns about the business's prospects. This isn't to say the price (and/or the business itself) couldn't possibly deteriorate further. Those looking for a deep value play may simply want to keep watching this stock. At around $2.50, the shares aren't in screaming buy territory just yet.
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Motley Fool contributor Catherine Baab-Muguira has no financial interest in any of the companies mentioned in this article. Take Stock is The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
