Interesting stock, page-110

The reported results were far worse than I anticipated, although the explanations given seem to hold water (tight inventory stuck in the wrong place, due to long-standing issues with their balance sheet, which are only now starting to improve). The outcomes therefore seem to reflect a business that was in survival mode for much of the last year.

The question really is, would more adroit management have been able to engineer something better, and for me at least, the jury is still out.

On the positive side, the balance sheet is in very good shape due predominantly to generous government support and the digital business is doing all the right things. In the long run, the focus on the customer and the improvements to inventory management that have developed as a consequence of Covid, on top of the formidable brand and store assets that Myer has, is going to be extremely valuable. The price action being largely unchanged despite reasonably poor results suggests to me that more than the worst has been priced in.

A big question for me is what the balance sheet looks like after what is likely to be another half of difficult trading conditions, as many of the exogenous headwinds will continue for the next half, which is also seasonally weaker anyway. I've trimmed my position, but it is still quite large- mainly because I think this is going to take much longer than I anticipated to properly turn around. I will re-assess over the next 6-12 months.