Iconic Chain Store Myer Dumped From Australia's Benchmark Index

Myer Dumped From Australia's Benchmark Stock Index By S&P

Matthew Burgess

11 Mar 2018, 09:53 AM IST

(Bloomberg) -- Less than a month after its chief executive officer departed, Myer Holdings Ltd. has been dealt another blow with Standard & Poor’s pulling Australia’s only listed department store from the benchmark index.

Myer, the second-worst performer on the ASX 200 over the past year, will be cut from the index effective March 19. Shares in the retailer have fallen 88 percent since re-listing in November 2009, having never closed above its A$3.84 IPO price, according to data compiled by Bloomberg.

Iconic Chain Store Myer Dumped From Australia's Benchmark Index

“I don’t see it coming back in a hurry,” said Steve Johnson, chief investment officer overseeing A$380 million at Forager Funds Management Pty. Ltd. “The business is facing very strategic challenges that are going to be very difficult to overcome.”

The struggling retailer has been seeking a change in fortunes amid increasing local competition and the arrival of Amazon.com Inc. Chief Executive Officer Richard Umbers stepped down in February after nearly three years at the helm and was replaced by Chairman Garry Hounsell amid a board “impatient” for a turnaround. Myer last month said sales had fallen in January and it didn’t expect an improvement in trading conditions in the second half of the financial year.

Read More: Here’s what analysts said about Myer’s weak sales

Myer, which at its peak operated 65 stores across Australia according to company filings and was worth A$2.3 billion ($1.8 billion), closed Thursday at A$0.46, valuing it at A$373.7 million. Morgan Stanley have suspended coverage of the stock, while analysts at UBS Group AG have it under review.

And there may be more tumult on the horizon. Billionaire Solomon Lew’s Premier Investments Ltd., which owns about 11 percent of Myer, plans to call a shareholder meeting to oust the current board if he can win sufficient support from institutional holders.

To be sure, being dropped out of the benchmark index may have an upside. In general, share registers change from larger fund managers to smaller shops that are prepared to hold the stock for a long period of time, Johnson, who doesn’t hold Myer shares, said.

“Nobody’s really watching you anymore,” he said by phone. “It doesn’t matter whether your next six months profit is not great, all that matters is whether you can create the right restructure to be profitable in two or three years time.”