Shares in department store group Myer Holdings Ltd (ASX: MYR) held the fort today and finished flat at 52 cents.
Myer shares spent a good portion of the session in the red but managed to claw back some territory in the final hour of trade.
This trading activity comes amid news the group is facing legal action from shopping centre landlord Vicinity Centres.
Here is what we know on the matter.
What is going down with Myer and Vicinity?
Back-tracking to 2020, when the coronavirus first infiltrated the global economy, shopping centres and department stores alike were sent into lockdown.
If it weren’t for online sales, then a good portion of retailers would be out of business indefinitely this year. Especially considering the exorbitant rent prices across major cities in Australia, as well as other factors like debt serving and staff payments.
There have been numerous controversies on the dynamics between landlord and lessee in basically all property domains across 2020–2021. This comes as both sides seek protection from the economic fallout of COVID-19.
Such is the case in Myer’s situation, where Vicinity claims that the department store giant has failed to pay over $4 million in outstanding rent this year.
According to reporting from The Australian, Vicinity claims that Myer is behind on rent from the months of May to October and is in arrears by $4.2 million.
And given Myer recorded a substantial growth in operating gross profit in FY21 to 39.7% – up from 38.9% in FY19 before COVID – and recorded over $50 million in net profit after tax, it comes as little surprise why Vicinity is playing hardball.
The news follows on from a previous legal battle Myer was embroiled in, although this time with large shareholder Premier Investments Limited (ASX: PMV) in July.
Back then Premier instructed its lawyers to immediately request a copy of Myer’s shareholder registry, advocating that Myer’s “three remaining Non-Executive Directors should for once put its shareholders first and resign immediately”.
Hence, the additional legal pressure could be a costly one to Myer, given it now faces a multi-pronged challenge from both Vicinity and Premier.
The market didn’t reacted poorly to the news today, which isn’t considered price-sensitive at this stage. However, it is still unclear if this will have any material impact on Myer’s share price.
Myer share price snapshot
In spite of the pandemic’s effects to the retail market, Myer’s share price has soared over 96% in the last 12 months.
This is after rallying another 79% since January 1. Both of these results are well ahead of the benchmark S&P/ASX 200 index (ASX: XJO)’s gain of around 17% in the last year.