University of Technology, Sydney
Myer Holdings Limited
Financial Statement Analysis: 22319

Group Assignment Part 1

Macroeconomic & Industry Analysis

Macro EconomicAnalysis
Worldwide economic turmoil spread in 2007 as a result of the Global Financial Crisis (GFC), with its effects continuing to be felt by many industries and economies, and particularly the retail sector. Currently, the global economy is resuming to a state of growth, with majority of economies recovering and stabilizing well. However, the Euro-zone Sovereign Debt Crisis has provided cause for uncertainty, affecting consumer confidence levels at a global scale. Recent figures have inspired investor confidence, with yields on government bonds returning to pre GFC
Together with Myer, these firms account for over 80% of the retail industry’s revenue (IBIS World, 2013). However, with over 300 players in the industry the market is highly saturated with growing numbers of online and international retailers increasing competition in Australia. It is also important to note Myer’s recent attempted takeover of David Jones, which highlights the industry’s high levels of market concentration and evidences Myer’s desire to expand amidst this challenging environment.

Differentiation & Switching Costs
Low
Given the level of intense competition within the retail industry, Myer’s customers face very low switching costs especially with the ease of online shopping. In addition, currently Myer stocks brands that do not offer consumers exclusivity. This low level of product differentiation is consistent with the industry, as most fashion retailers stock the same seasonal trends. Further, over 80% of Myer’s sales are in goods that are not exclusive to Myer. This has resulted in low switching costs and low levels of brand loyalty for consumers.
Economies of Scale and Learning
High
Myer like many other large department stores have significant economies of scale and can leverage off continued expansion of its network of 67 stores nationally, and sourcing contracts with over 800 suppliers. Due to its size,