What happened? Shares in Myer Holdings Ltd (ASX: MYR) plunged a further 3% today to $1.33 at lunch time, just five cents above the 5-year low of $1.28 hit in April this year.
Today's plunge is notable because it comes on the day when Myer announced the appointment of Mr Grant Devonport as Chief Financial Officer of Myer, following a career of over 30 years including senior roles at listed entities in Australia, New Zealand and the United Kingdom.
What does it mean? On the surface, it appears that Myer has snagged a great pickup in Mr Davenport, who has held senior positions in ASX-listed groups from Toll Holdings Ltd (ASX: TOL) to Village Roadshow Ltd (ASX: VRL) and National Australia Bank Ltd. (ASX: NAB).
The trouble for Mr Davenport is that his appointment comes at a time when Myer, and the consumer discretionary sector as a whole, is struggling. In February and March alone, OrotonGroup Limited (ASX: ORL), Metcash Limited (ASX: MTS), Woolworths Limited (ASX: WOW), Specialty Fashion Group Ltd. (ASX: SFH) and Kathmandu Holdings Ltd (ASX: KMD) all disappointed the market with downbeat trading updates.
In a release last month, Myer reported moderately upbeat numbers that total third quarter sales were up 2.4% to $661.8 million, aided by the refurbishment of four stores and opening of two new stores before Christmas. On a comparable store basis, sales were up 1.7%.
Year-to-date sales climbed an impressive 1.7% to $2,425.3 million, however sales were impacted by "subdued trading conditions in Western Australia and Queensland". Current projections indicate that Myer is on track to equal or beat last year's revenue result, but it's profitability that's the concern right now.
What Now? Mr Davenport's first priority will be to assist Chief Executive Officer Richard Umbers in understanding why Myer's profits have fallen from $163 million in 2011 to just $99 million last year and a predicted $70 million this financial year.
Of equal importance will be determining how to keep the group's dividend payout significantly high to avoid investors selling off the stock further. Analysts are predicting that Myer will announce a 3 cents per share final dividend to take the full-year payout to 10 cents, or a 7.2% yield based on the current share price. When taking into account the group's 100% franking credits, that yield jumps to over 10%.
