break up value, page-16

Agree with some of your sentiments twinsen. The Internet is changing the long-term competitive landscape for brick and mortar retailers like Myer especially the pricey ones. Three points however:
1. I hardly shop at Myer and would never even think about shopping at DJ. I think Myer is a bit less up-market than DJ so imo is likely to suffer less than DJ from any drop in discretionary spend than DJ. Prefer Myer to DJ in that regard

2. While I agree it is cheaper to shop online for merchandise than at Myer, there will always be a section of the consumer community that prefers to walk in, get personal attention and pampered and sold to. It is a bit like cooking at home and eating out. We know it is cheaper to cook at home but still occasionally prefer to eat out. Consumers don't mind paying extra for the convenience.

3. If we get a recession, we'll get rates coming down and perhaps luckily another stimulus package (yipee). I think the very hawkish Reserve Bank policy of jacking rates has affected retail many folds more than online shopping. So the two speed economy could very well work the other way. Mining and material industry down and consumer/retail industry up.

Myer is a buy for me at around 2 bucks. Would ideally want to wait for guidance for management for FY2012. Might be a good idea to get in when it gets absolutely butchered but it may surprise to the positive in which case it may be prudent to take half position now and half after announcement.

Some back of envelope calcs. They are forecasting NPAT for 2011 to be up to 5% below last year's result ($169 million) so say $160 million. That is EPS of 27.53cents. Now we know markets are forward looking rather than backward looking, so lets say under worse case scenario, they reduce FY12 earnings by 15%. That gives EPS of 23.4cents. So it is still trading a P/E ratio of less than 10, actually it is 8.9. Strategy for me is to take advantage of any short term mis-pricing opportunities the market may present.