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Is Myer Holdings Ltd at bargain prices?

With all the media attention on David Jones Limited (ASX: DJS) from the takeover offer, Myer Holdings Ltd (ASX: MYR) may seem a little jilted. Over the past six months Myer shares are down about 23% compared to an approximate 5% rise in the S&P ASX 200 Index (ASX: ^XJO), so the market is not hot on the company either. So what does Myer have to look forward to and could this weakness be an opportune time for investors?

–  Warm weather and mid-year clearance sales

The above average warm weather is disrupting winter goods sales so much so that Myer announced it will postpone its mid-year clearance sales. Just before the financial year end, these sales are very important to second-half revenue. If colder temperatures do finally come, then sales could be salvaged. If not, then heavy discounting will be necessary to clear stock.

–   Lower consumer sentiment

Consumer sentiment has slipped recently and retail trade figures for April show flat growth in the trend estimate. Signs of a recovery in sales around Christmas are slipping now.

–   High dividend yield

Myer Holdings stock is offering a 7.5% dividend yield, so investors seeking yield may be attracted. However, if full year results show weaker earnings, the final dividend could be affected.

–   Solomon Lew and David Jones

A late development involving Solomon Lew, the chairman of Premier Investments Limited (ASX: PMV), buying a stake in David Jones is stirring up news, with talk the investment may be to block Woolworths Holdings’ takeover offer of David Jones. Evidently Myer investors have a lot to think about, especially if the possibility of a merger with David Jones comes back on the agenda.

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Motley Fool contributor Darryl Daté-Shappard does not own shares in any company mentioned. 

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