Trading in shares in beleaguered department store Myer has been halted as the chain prepares a response to claims that its first-quarter profits have taken a further hit in recent months.
The ASX ordered a pause to trading in Myer shares shortly after the sharemarket opened on Friday.
The pause followed reports that claimed Myer had failed to report critical information to investors.
That information, according an article inThe Australian Financial Review, is that Myer’s sales have fallen 5.5 per cent year-on-year and profits are on track to end the first half of the 2018-19 financial year a full 60 per cent below their level at the same period in the 2017-18 financial year.
A 60 per cent decline would be more than $24 million. Under the ASX’s rules for listed companies, a loss of that size must be reported to the market.
Myer said it was “well aware of its continuous disclosure obligations and confirms it is in compliance with them”. Nonetheless, the ASX subsequently paused trading in the business’ shares.
Since then, Myer has formally requested (and been granted) a trading halt. It will remain in place until either the market opens on Tuesday, November 20, or until Myer makes an official announcement to the market.
The disruption to trading comes just two months after Myer’s board came under fire for its $486 million annual loss (the first full-year loss recorded by the business) on September 12.
Solomon Lew, chairman of Myer’s largest shareholder, Premier Investments, said at the time the business’ management was “an absolute disgrace”. He also called for Myer chairman Garry Hounsell to step down.
Investors concerned, but shoppers in luck
David Kindl, chair of retail business consultancy Retail Doctor Group, told The New Daily that consumers could win if the reported sales figures were accurate.
“If sales have been poor in the lead-up to Christmas, then we’ll likely see more products on sale, and the sales will start earlier, so you should definitely keep your eye out for a discount,” he said.
Investors, on the other hand, will likely be worried about the effectiveness of the business’ plans to reorient itself to meet changing market conditions, as department stores continue to struggle with online retailers and growing competition.
However, Mr Kindl said, there was still hope for Myer.
“Myer is a great Australian business and we want them to do well, and I think they will be successful in the long run,” he said.
What is a trading halt?
Trading pauses, halts, and even sometimes suspensions are all mechanisms used by businesses to manage their disclosure obligations.
Listed businesses are required to keep their investors, and the broader market, aware of developments that might influence the share price or otherwise affect the company.
These halts give businesses more time to prepare a statement to the market on any relevant issues.
Halts and pauses also prevent investors from trading shares in a business in an uninformed manner.