The season of goodwill doesn’t extend to Myer Holdings Ltd (ASX: MYR) and Premier Investments Limited (ASX: PMV) with the former all but accusing Premier Investments of leaking information against the embattled department store.
The Myer share price dipped around 1% to 41 cents this morning while S&P/ASX 200 (Index:^AXJO) (ASX: XJO) is up a quarter of a percent.
The underperformance also stands in contrast to the gains in the consumer discretionary sector. The PMV share price is 0.8% higher at $16.50 while the Harvey Norman Holdings Limited (ASX: HVN) share price, Flight Centre Travel Group Ltd (ASX: FLT) share price and Wesfarmers Ltd (ASX: WES) are all trading higher.
Myer was forced to defend itself again when the ASX issued it with an “aware query” following its quarterly sales result controversy.
What’s an “aware” notice?
Listed companies are obliged to inform the ASX whenever they are in possession of information that could materially impact on its share price.
Myer had to respond to the aware query to defend its response to an article published by Fairfax Media Limited (ASX: FXJ) that suggested its September quarterly sales had plunged further.
Management said the information was illegally leaked to Fairfax and it contained inaccurate and incomplete information.
Myer also suggested in not so many words that its largest shareholder Premier Investments, may have had a hand in the leaking as Premier Investments’ chairman Solomon Lew is trying to spill the board and seize control of Myer.
Lawyers for Premier Investments had written to Myer’s board before the Fairfax article was published demanding the department store release its September sales results.
Myer has earlier said it was ceasing the practice of issuing such quarterly updates as it wanted investors to focus on profit and not on sales.
The change in focus from sales to profit is a sound one. It is inevitable that department stores like Myer will continue on a downtrend due to the growth of online shopping rivals, including US titan Amazon.com.
The only way for Myer to regain favour with the market is to focus on lifting shareholder returns as opposed to top-line growth.
But this transition is a painful one. Fairfax went through its own baptism of fire as investors were so heavily focused on circulation figures for its mastheads.
The online revolution meant circulation figures were getting increasingly redundant and management should have moved earlier to lift return on invested capital and profit margins.
If Myer can successfully navigate the maze, it should also be able to find a floor for its share price, just as Fairfax has.
Unfortunately, the jury’s still out.
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Motley Fool contributor Brendon Lau owns shares of Premier Investments Limited. The Motley Fool Australia owns shares of and has recommended Flight Centre Travel Group Limited, Premier Investments Limited, and Wesfarmers 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 Scott Phillips.
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