The September capital raise was too late in the year to benefit Christmas sales. Sure, borrowings have been slashed, but that merely saves the interest cost.
A major retailer like MYR needs a very large current asset position - stock, prepayments to suppliers for discount which looks forward for up to a year to exploit its buying power, a generous advertising budget, the flexibility to exit unsuccessful stock purchases quickly and to double up on good purchases, a fresh and electric store environment to engender consumer confidence and prompt sales. I could go on. My point is, these are current asset matters and here is the core of retail.
Department stores are an ideal place for capital, which is why I hold this stock that so many regard as dowdy and old fashioned. Yes, MYR can be nimble and play to its strengths. It will take management some time to put the cash raised to best use. I am very confident they can and will show a surprising turn of speed as they redeploy the new, larger balance sheet.
DYOR
MYR Price at posting:
$1.10 Sentiment: Buy Disclosure: Held
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