Just days after Myer revealed its future direction, the retailer has seen its share price savaged, placing its $600 million strategy in doubt. In stark contrast, Harvey Norman offers are likely to be boosted following a strong recommendation today from Deutshe Bank that it is the leading retail stock to buy.
Myer shares dropped to a new all-time low after the completion of the first part of the department store’s $221 million capital raising. They fell to 94 cents at 11.45am, after dropping to 90 cents overnight. Myer shares were valued at $4.10 when they first went to market in October, 2009.
Their value had been diluted by the offer of two new shares for every five owned by investors.
Credit Suisse retail analyst Grant Saligari has told The Australian that the share price fall reflected “a very low confidence in the strategy that has been articulated”.
According to Saligari, “To trade below the rights price is pretty significant,” adding that, “It’s a very poor show of confidence.”
While launching its new strategy, Myer reported a 70% drop in full year profit to $29.8 million, and launched a $600 million overhaul of stores in an effort to boost sales. However, analysts have been doubtful about its prospects of success.
To help fund the plans, Myer has so far raised $99 million from institutional investors, and expects to raise a further $122 million through a fully underwritten retail entitlement offer.