Joseph Taylor: Hi, Lochlan. Thanks for joining me today. So, Myer (ASX:MYR) has been in the news recently. It's proposed a deal to buy Premier's (ASX:PMV) apparel brands, including Just Jeans and Jay Jays. So, this comes at a time when a lot of consumer-facing businesses have actually been under quite a lot of pressure. What does Morningstar think about the deal?

Lochlan Halloway: Yeah, look, I think from the get-go, we've got to say there's a lot of uncertainty here. I mean, we don't know a price for starters. We don't know whether the deal is going to actually end up going through. So, we've got to make sure we keep that in mind. There's not a lot of detail at this stage. What we can say, though, I think strategically, I don't think we're necessarily overly excited about this one. It's combining two mature low-growth businesses here. Yes, there are probably some sort of fractionalization benefits that Myer will get out of this. So, they might have fractionalization coming out of the overhead costs by having a larger scale and probably more bargaining with their suppliers and possibly the landlords as well. There are benefits there, but by the same right, Premier loses those benefits. So, they're going to have to be compensated we expect some way in the price.

The other thing too is that it gives Myer a much larger network they will have to oversee. It's more complex network than their departmental network as it is now. And also, it gives them a foothold in New Zealand, which might be an opportunity, but also creates other sort of administrative challenges there. So, overall, it looks like something that's early stages. And we'd say until we really see the price, it's quite hard to make a judgment on this one.

Taylor: So, you mentioned that we haven't actually seen a price yet. In terms of the broader strategy, we've seen Myer commit previously to reducing its physical footprint, growing its online sales. How does this fit with that?

Halloway: Yeah, look, I think you pointed out an important point, which is that Myer has been rationalizing, and that's working well for them. In a world where we've got increasingly more sales, particularly an apparel going online, it makes sense to have a more efficient, leaner store footprint. That's what they've been doing, and it's been working well. This one, I would imagine that they would just keep continuing on with that strategy in general. I mean, if you've got a lot of channel shift online, you keep cutting back, you keep finding efficiencies.

The other thing too, I mean, it's probably important that with the integration here that they get that right. There could be challenges to this. In terms of online fulfillment, we have two separate businesses here with presumably different fulfillment strategies, and they're going to have to bring those two together to make that efficient. So, it's probably going to be a continuation of the same thing, which makes sense with where e-commerce growth is. But I would say, to your point earlier, it's probably just a continuation, yeah.

Taylor: So, it's pretty clear that the markets like the sound of this deal. Myer shares have risen considerably since they announced their intention. They've now risen to a level where Morningstar think they're roughly trading at around fair value. What will you be keeping an eye on going forward?

Halloway: Yes, of course, any more information about price, looking under the hood of apparel brands in Premier, when they start to release more of that after the due diligence process takes place, that will be really what informs the judgment about this deal and whose shareholders benefit out of this. Generally speaking, though, whether the deal goes through or not, the strategy for Myer is probably going to be more of the same in terms of making sure they have a lean and efficient retail network, brick and mortar retail network, and also ensuring that they are shifting sales online as e-commerce continues to grow. So, that will continue to be, I think, the story that dominates brick and mortar retail.