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Myer Holdings Ltd shares rally on CEO resignation

On Wednesday morning the Myer Holdings Ltd (ASX: MYR) share price is heading in the right direction at long last.

At the time of writing the department store operator’s shares are up 4% to 55.5 cents.

Why are Myer’s shares rallying higher today?

This morning the company announced that chief executive officer and managing director, Richard Umbers, has stepped down from his role.

In the meantime Garry Hounsell has been appointed as the company’s executive chairman with immediate effect whilst a search for a new managing director and CEO takes place.

Mr Hounsell said: “We are impatient for a turnaround in the company’s performance and the Board has determined that it is in the interests of all shareholders for there to be a fresh approach to drive our future direction.”

I don’t think Mr Umbers’ resignation will come as a huge surprise to investors. After all, under his watch the company has delivered three profit downgrades in the space of just 12 months.

He had also come under fire from major shareholder Premier Investments Limited (ASX: PMV) in recent months. Its chairman, Solomon Lew, heavily criticised the department store’s turnaround strategy and this week had been in the process of preparing an extraordinary general meeting for Myer shareholders.

I suspect top of his agenda at the EGM would have been the ousting of Mr Umbers from the top job. So I have little doubt that he will be pleased with today’s news.

Should you invest?

Although a change at the top is something that I feel Myer well and truly needed, there’s no guarantee that the new CEO will be able to turn around the company’s fortunes.

In light of this, I continue to believe that investors should stay away from Myer. Instead, retail shares like Noni B Limited (ASX: NBL) and Lovisa Holdings Ltd (ASX: LOV) could be far better options in the industry.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Premier Investments Limited. 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.

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