As quoted on Sky News this morning, analysts from Citigroup have opined that Myer Holdings Ltd (ASX: MYR) could close up to seven underperforming stores in order to improve financial performance.
The analysts also felt that lifting staff numbers and conducting more marketing could also improve sales.
There's no denying that changes need to be made, with Myer having been in steady decline ever since its Initial Public Offering (IPO) back in 2009.
But the question at the front of my mind is whether a new CEO and a business restructure is enough to turn the situation around.
In addition to struggling to sell its products and maintain margins, Myer faces increased competition from bricks-and-mortar stores and also online retailers, who have lower fixed costs.
An additional headache is the fact that the ability of foreign stores to compete in the Aussie market is seemingly unaffected (as yet) by the weaker Australian dollar or the potential for additional legislation for the online sector.
And Myer isn't the only retailer struggling, with Orotongroup Limited (ASX: ORL) also failing to increase its earnings after a decision to reduce the amount of discounting resulted in slower sales.
It's a similar story at Myer, with the department group's decision to focus on its exclusive brands not yet enough to salvage earnings decline – and increased spending on acquiring new brands may not stop the rot either, with overseas brands like H&M and Sephora also entering the Australian market.
Online sales are usually touted as a potential solution to Myer's problems, but from what I've seen so far it appears as though a number of customers who would ordinarily shop at Myer have simply switched to shopping online.
While there is also likely an increase in new customers, I doubt if online sales are the solution to the group's misfortune.
A combination of new CEO, more marketing, better online offerings, store closures and more will be required to turn Myer's fortunes around, and even then I'm not in a rush to buy shares.
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