Myer has announced its plans to acquire Premier Investment’s Apparel Brands division, which owns Just Jeans, Jay Jays, Portmans and Dotti.
👉 Background: Myer is the iconic Australian department store that’s been selling men's and women's clothing since 1900. It first listed on the ASX at a valuation of $2.2 billion in 2009 - but since then, it has struggled with a market cap of around $200 million during COVID.
👉 What happened: Myer has announced its plans to acquire Premier Investment’s Apparel Brands division, which owns Just Jeans, Jay Jays, Portmans and Dotti. While these brands aren’t so sexy, they generated $845 million in revenue last financial year.
👉 What else: Interestingly, Premier Investment’s already owns around 31% of Myer. Off the back of this announcement, both company's share prices boomed because it would help Myer improve its razor-thin EBIT margin.
💡You can sell as many products as you like but if your margins are tight, your business is on unstable footing.
💡Myer generated $3.4 billion in sales in its most recent financial year but its EBIT margin was a pretty poor 6%. This means for every $100 it generated in sales, it only made $6 in earnings before interest and tax.
💡Macquarie analysts believe the Apparel Brands, like Jay Jays and Portman have an EBIT margin of over 15%, so if Myer was to acquire these brands, it should increase its topline revenue by around 25% improve its earnings by significantly more.
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