I equate Myer to a different example - Nokia. The mobile industry underwent a massive change when Apple released its smart phone. Nokia lagged behind the changing market and also had poor management in-place to adapt to its environmental change. When a industry undergoes a major change, you want a management team that is open to ideas and external influences to ensure you successfully adapt. If you truly ask yourself and listen to that gut feeling, you will know what Myer's chances of success are in this changing environment. Just look at the bitter feud with Solomon. A public fight is on for display and for me personally, Myer has a board that is old school that still lives in the good old days of the past. Myer has an average online store and an average brand in the market. Regarding the brand, just compare Myer to David Jones. For most Australians, David Jones is considered more prestigious and upper market. In my family and friend circle, when i ask where people shop for designer dresses or kitchen appliances, i get a resounding DJ response. They have the brands like Miele, Smeg etc. If you ask any women which store she prefers to shop, its a resounding DJs response. I think Myer tried a new marketing strategy to get more foot traffic through the door by lowering prices and having sale weekends but its backfired. Its damaged their brand a little and they are perceived as middle market in the current market place, exactly where Amazon plays. David Jones realised you can't compete to Amazon on price or foot-traffic as Amazon have infrastructure that is built for lower prices. David Jones have the better strategy of targeting high end customers for high end (higher margin) products. The volume may not be their but the profitability certainly is due to the higher margin. So I like to think of Myer more akin to Nokia and we all know what happened to Nokia.
To elaborate on the Amazon infrastructure and margins - amazon build warehouses, build a network of shipping and already have a very user friendly online store. As an individual I can sell products on amazon and sell goods using their infrastructure. This is what makes Amazon better and above the rest. Its like having top tier fibre to all homes and buildings. Faster access and lower cost. The infrastructure takes a year or so to build but once it is established you can say goodbye to the margins and growth of any brick and mortar retailer. Regarding the next 12 months for Myer, you may get a quick return of 20-30% return if rumours build regarding a Solomon Lew takeover or Myer extremely outperform over the last quarter. However, if its a slightly better than anticipated sales period over Christmas, don't expect a 30% gain. The insto's won't budge and won't invest the capital required to give you the 40% you are looking for. They can see 2-3 years down the road and would be slowing exiting Myer as they know the damage Amazon can have which is highlighted in Canada and my previous post. Only person who could move the stock 40% is a Solomon Lew takeover (period).
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