Top fund manager thinks Myer Holdings Ltd (ASX:MYR) could make a 100% return

There’s one particular fund manager out there that thinks Myer Holdings Ltd (ASX: MYR) could make investors a 100% return.

This is the same retailer that has seen its share price fall by nearly 80% over the past five years and 42% over the past year.

The fund manager in question is renowned investor Geoff Wilson from Wilson Asset Management who said yesterday that Myer shares could go up 100% if things go right.

Solomon Lew of Premier Investments Limited (ASX: PMV) has hounded the Myer Board this year for their part in Myer’s demise. In today’s AGM there has been a large protest vote against the directors.

However, Mr Lew is more supportive of new CEO John King, the former chief executive of House of Fraser in the UK where he turned it around and managed the business for eight years.

Mr King has been a busy man since starting as CEO, visiting 55 Myer stores. One of his key takeaways is that Myer needs to do more for customers by improving service and delivering high-quality & exclusive brands.

Myer has taken the axe to a number of costs to turn improve profitability. It has reduced the Chairman’s fee by 25% and the Directors’ base board fees by 20%. Directors also have to hold a minimum amount of shares.

The department store has also done things like exiting the ‘Birdcage’ at the Melbourne Cup Carnival, removing a significant number of management positions at the support office and it’s looking at further reducing rental costs of the support office.

Myer is also going to close all clearance floors in 2019 to focus on enhancing product quality across the company.

FY19 progress

Myer is focusing on long-term profitability, so the short-term may be difficult. Even so, despite total sales value in the first quarter of FY19 being lower than the first quarter of FY18, the net loss pre-implementation costs and significant items was an improvement on the prior year.

Mr King will not chase top line revenue growth if they add little to the bottom line. Chairman Garry Hounsell also reported that total online sales had grown by 28% year on year in November.

Is Myer worth investing in?

If John King is good as Mr Wilson thinks he is then Myer could return 50% to 100% on the share price.

Of course, that only takes it back to a mid-2017 share price. But, for new investors like WAM Capital Limited (ASX: WAM) that could be a great return.

I doubt we will see Myer go back above $2 any time soon, perhaps ever. However, if Mr King’s strategy works it wouldn’t take much to generate a decent profit.

I personally won’t be making that bet, I’d prefer going for a retailer with overseas expansion like Premier Investments or Specialty Fashion Group Ltd (ASX: SFH). But retail, particularly fashion, is a tough industry so I’d personally rather not invest there at all.

Motley Fool contributor Tristan Harrison 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 Scott Phillips.

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