Myer reported underlying EBIT of $139 million for FY26, down 23% on the proforma pcp. Myer delivered flat sales growth and gross margin fell 80bp on a proforma basis. Myer’s trading update for the first eight weeks of FY27e reported total sales of -2.7%. We have increased our sales forecasts, lowered our gross margin expectations and our lease interest expense.

Australian retail sales rose 4.8% year-on-year in February 2026. Growth has softened a little, reflecting soft growth in food & liquor and a slowdown in household goods. Growth in dining out and online retail remain above trend, suggesting consumers took the February rate hike in their stride. The starting point for the slowdown in retail sales is reasonably strong and we may see March growth at 3%-4% overall following higher petrol prices. A return to sales growth near 4% is our view and more consistent with a neutral cash rate backdrop.

Myer Holdings reported 1H26 group EBIT of $113 million, down 17% on a proforma basis. Sales growth of 2.1% was offset by lower gross margins and cost investments. We have revised our sales lower on store count and slowing comps. We lower gross margin expectations and delay synergy and supply chain benefits. Fixing the supply chain issues, delivering on synergies and leveraging Myer One should all translate into meaningful earnings growth delivered from a strong financial position.

Myer reported total sales growth of 3.0% for the first 19 weeks of trade for 1H26e. With Visible Alpha consensus expectations of 2.2% for 1H26e we expect upward revisions to consensus sales. Commentary around costs suggested expenses continue to be tightly managed. The stronger than expected growth came from lower gross margin categories such as concessions and homewares.

Myer reported an FY25 EBIT of $140 million, down 14% and inclusive of six-months from Apparel Brand. On a pro-forma basis Myer Group EBIT for FY25 was $174 million, down 30%. Sales trends are showing modest improvement. We expect flat gross margins from continued promotional pressure. We forecast cost growth of 3.6% to result in EBIT down 2% for FY26e (on a pro-forma basis). Shareholders will need patience. Myer will need to deliver on synergies which are largely expected in FY27e.

The Myer strategy day gave a clearer view of the business in its current form and addressed many initiatives to drive improvement. Strategies previously outline are on track to be delivered in FY27e. There are several initiatives underway with no long-term targets provided yet. As Myer delivers on initiatives we expect to hear more on targets.

Myer reported flat sales, but EBIT down 15% in 1H25. Sales were impacted by issues at the new National Distribution Centre (NDC) which shifted the sales mix to lower gross margin concession product. The trading update showed a flat start to the second-half. Earning will be largely driven by synergies and cost out initiatives over the next 2-3 years.

We have initiated coverage of Myer (MYR), a domestically focused department store retailer with an industry leading loyalty program, a $700 million online business and a national store footprint of over 50 stores. Myer department stores have a value proposition in the in the mid to high value range. While the merger of Myer and Premier Apparel Brands builds scale, the combined business has weak sales trends and thin margins. Earnings growth in the next three years is driven by the delivery of synergies. The combined group will then grow modestly unless we see the exit of one or more competitors. Any misstep in achieving the synergies will not be well received in our view. 

We have produced a chart pack of retailer performance vs market (see PDF report). This market share report provides two insights – 1) Performance of key ASX-listed retailers compared with market growth. 2) Market structure and individual retailer performance over time. The data includes actual six-monthly growth in industry sales to end of June 2024.

The spike in spot sea-freight rates is likely to remain topical over the next few months and add to concerns about retail profit margins in FY25e. Our feedback is that spot sea freight rates for Australian importers are now close to 3x the low point seen only 12 months ago. The good news is many retailers have 12-month contracts. The bad news is that it looks like a step-up in freight rates is coming either way as we move through FY25e and adds risk to earnings. The retailers most exposed to higher sea freight rates are Nick Scali, Wesfarmers and Super Retail Group.