Myer Holdings Ltd (ASX: MYR) released its third quarter trading update, revealing weak sales and a revenue decrease of 0.9% for the 13 weeks to 26 April. The department store operator stated that refurbishments being carried out on three of its top 20 stores and the commencement of refurbishment at another have impacted results. The effects have been offset partially by its new Shellharbour, NSW, store opened last year in May.
In its first-half interim report, comparable store sales were up 1.2%, yet in the third quarter it was up only 0.24%.
It is looking forward to completion of refurbishments in two of the stores in the fourth quarter and plans to open two new stores before Christmas. In addition, the recently completed Emporium shopping centre in Melbourne, which is adjacent to its flagship store, will give it extra floor space to set up more men's clothing and a large toy section.
Consumer spending and retail trade in general have been on the rise since late 2013, but department store retailing has not been as strong as specialty retailers such as Kathmandu Holdings Ltd (ASX: KMD) and JB Hi-Fi Limited (ASX: JBH).
Rival department store operator David Jones Limited (ASX: DJS) saw a similar like-for-like sales increase of 1.1% in the first half.
Myer was hoping that its proposed "merger of equals" with David Jones that it offered several months ago could be worked out even if David Jones was wanted more of a premium. It may have created some savings synergies, but they would have to work out some kind of way to work together while keeping the two brands distinct.
That situation was upset by the unexpected takeover offer from South Africa-based Woolworths Holdings Limited (Johannesburg: WHL) for David Jones, for $4 a share, well up from the $3.19 share price before the offer was announced.
If the takeover goes through, Myer will be by itself and may have a stronger rival through the financing of Woolworths Holdings, which wants to make itself the largest department store company in the Southern Hemisphere.
Foolish takeaway
It may be best to see how fourth quarter and full-year results turn out before judging the whole situation. Myer's share price is down to $2.12, whereas about 12 months ago it was around $3.10. Look for a possible share price bottom to form and signs of like-for-like sales improving.
