Why Myer Holdings Ltd shares could keep moving higher

There haven’t been many in the last few years, but today is a great day for shareholders of department store operator Myer Holdings Ltd (ASX: MYR).

Following the release of its annual general meeting presentation this morning the retailer’s shares have rocketed higher by over 8% to $1.13.

The reason for the excitement is likely to be its first quarter trading update which revealed that same store sales rose 1.6% during the quarter.

Impressively the Australian Financial Review reports that this is the first time it has grown comparable sales at a quicker pace than arch rival David Jones in over two years.

It also means five straight quarters of same-store sales growth, which possibly indicates that Myer’s turnaround strategy is in fact working.

Comparable store sales in Flagship and Premium stores increased at a stronger rate of 2.8%. This helped lift total quarterly sales by 0.6% to $719.2 million despite store closures and refurbishments.

For the full year management expects EBITDA growth to exceed its sales growth. Rather positively it also anticipates a return to profit growth.

Whilst I am reasonably bearish on the company, I will happily admit that Myer’s transformation so far appears to be working well. The strategy may well result in solid returns for shareholders over the next couple of years, especially considering how cheap its shares are relative to the rest of the market.

But I would suggest investors tread carefully. Whilst I have been impressed with the progress Myer has made with its omni-channel sales, the potential arrival of Amazon on Australian shores is something of a concern.

Retailers such as Myer, JB Hi-Fi Limited (ASX: JBH), and Woolworths Limited (ASX: WOW) could come under significant competitive pressure should the much-speculated Amazon launch occur. For this reason I would avoid these shares.

Instead of the aforementioned retail shares I would suggest investors look at an investment in these hyper-growth companies. Catch them before they soar!

Why These 3 Blue Chip Shares Are Set to Soar for Smart Investors

Discover The Motley Fool's Top 3 blue chips for Smart Investors. These 3 'new breed' shares pay fully franked dividends AND offer the prospect of significant capital appreciation. Simply click here to gain access to this comprehensive FREE investment report.

No credit card required!

Motley Fool contributor James Mickleboro has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.