Given how important the Xmas period is to the results, I think a...

Given how important the Xmas period is to the results, I think a cautious outlook is ok. In my opinion the boardroom stoush is a sideshow (unless of course the MD ends up departing before the end of the half, which I think is unlikely). I couldn't attend the AGM and will have to listen to the webcast to see if there is anything noteworthy.

I think fundamentally, that the strategy is sound and the question is whether they can work off their lease liabilities without requiring recapitalisation. If the answer to this question is yes at the end of the day, then the business has to be undervalued according to any standard valuation metric. The current market pricing is implying a significant risk of not meeting the lease liability obligations and entering either VA or a dilutive raise.

They did a pretty decent job in H2FY20 under the circumstances, but ended up with a substantially reduced inventory position (some 30% lower than the year prior). Importantly, Myer has for a number of years, slowly been improving their inventory turn (very slowly, but improving nonetheless). Both Adairs and Mosaic reported very significant margin uplift (~6%), targeting similar demographic customers, which suggests to me that Myer could improve their gross margins by about 2-3% (I personally don't think Mosaic is a particularly strong suite of brands myself- it seems to be that stock shortages have forced less discounting which has resulted in the margin expansion). David Jones has reported only a 10% decline in turnover in the first 10 weeks of trading (as far as I can remember) on a similar reduction in inventory, as have virtually all other discretionary retailers. This, to my mind, indicates that improving inventory turnover is possible.

By my calculations, all else being equal, achievable goals in the current retail environment would be*:
1. improving GM by 2-3%
2. increasing inventory from end FY20 by 10-15% this half (I used an average position of 285m)
3. improving inventory turnover days from ~92 (FY20) to ~82
Would generate roughly 1.6B in sales for the half and nearly 140m in EBIT (not accounting for Jobkeeper, further impairments etc). NB- I just pulled across exact numbers for sales, marketing admin etc from H120, although I would have expected them to be lower.

This is obviously VERY sensitive to inputs.
Keeping inventory at an average of 256m, with 41% GM gives a 30m EBIT, whilst keeping the average inventory at 256m and a 38% GM gives -11m EBIT. My best guess (and it is really just a stab in the dark)- would be slight improvement in margins and slight improvement in inventory turnover, resulting in 1.5B in sales and approx 70m in EBIT prior to abnormals (of which, based on past performance there will be some).

I think if they can achieve half decent results over this covid affected half, whilst international travel is still off the table and people are reluctant to go out too much, that there will be enough time to complete the turnaround without a dilutive capital raise. As such, I personally intend to support the MD through this half at least, and see how they actually compare against other retailers before making any judgements.

I would be grateful if anyone can put up the numbers they have to compare against mine- I am all for finding out analytical errors I have made sooner rather than later!

*I could very well have made a mistake on this- and happy for anyone else to put up different figures to mine.