Whilst I was finishing up working at the end of Friday last week, I was completely surprised to read that Myer Holdings Ltd (ASX: MYR) has a new substantial shareholder.
Listed investment company (LIC) WAM Capital Limited (ASX: WAM), along with other associated WAM entities, announced to the market that the 5% substantial holding threshold had been passed.
Whilst the WAM group crossed the threshold on 14 September 2018, the investment team had been accumulating shares going back to 4 July 2018, with a large purchase of shares on 6 August 2018.
My colleagues and I had only just been discussing which was a harder business to turn around – Myer or AMP Limited (ASX: AMP), earlier in the day.
In an email to investors WAM’s chief investment officer Chris Stott said “CEO John King has a strong track record after previously turning around British department store House of Fraser. We believe his ‘back to basics’ approach, focus on the customer and reduction in corporate costs is the right strategy for the business.”
Mr Stott also pointed out that Myer has recently reached an agreement with creditors to refinance a $400 million bank facility, granting Myer two and a half years to improve its position.
Whilst Myer does have a plan to turn things around it could be a very difficult road ahead. Myer has disappointed many recent shoppers with reports of a confusing store layout, poor customer service and even that the stores are too dark.
Another issue for customers seems to be that many staff in the store are actually employed by the brands sold inside Myer – therefore they are unhelpful and unable to help when asked about other brands and other Myer queries.
The Myer share price recovered around 50% from last week’s mid-week low of $0.40. Even now, it’s trading at 15x FY18’s underlying profit before significant items.
This doesn’t strike me as a long-term investment. If Myer can turn things around then sentiment and profit could get a quick boost. However, department stores in the USA show how difficult it is to succeed in this era of internet shopping in the longer-term. I’d rather go for a retail share like Specialty Fashion Group Ltd (ASX: SFH) over Myer at today’s prices.
Indeed, this top ASX share could be one of the best ones to own for retail growth, it’s one of the businesses disrupting Myer.
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Motley Fool contributor Tristan Harrison has no position in any of the 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 Scott Phillips.