DEUTSCHE BANK: Myer needs to do more than shut a few stores

Models showcase designs by Maison Scotch at the Myer A/W 2015 Season Launch in Melbourne. Graham Denholm/Getty Images

Deutsche Bank thinks Myer is still far from fixing its problems.

The struggling department store chain will find it hard to meet its own sales forecasts for this financial year and well into 2016 after it started closing stores, according to the investment bank.

Myer this week announced it will close its Top Ryde store in Sydney in late July, saying the majority of customers are also shopping at its stores nearby.

This move is all part of a strategic review which will also see three stand-alone specialty stores in Melbourne closed in late August.

Deutsche Bank analyst Michael Simotas, in a note to clients, says Myer’s sales growth in the 2016 financial year will likely be subdued as a result of the closure of the stores.

And Myer’s sales guidance of 3% to 4% growth for the second half of 2015 looks difficult to achieve.

Deutsche Bank notes that Myer management has previously stated that all stores are profitable on a contribution basis.

“Therefore the closures announced today will negatively affect profitability,” Simotas wrote.

Myer’s results for the half year showed net profit down 23.1% to $62.2 million. Sales were up 1.5% to $1.763 billion or up 0.9% on a comparable store sales basis.

CEO Richard Umbers, who in March replaced Bernie Brookes in the top retailing job, says the store has lost relevance and a new strategy is needed.

Myer shares are trading at $1.47 today.

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