Like Kathmandu, Premier Investments (PMV) had already guided the market to expect a better first half results and the shares responded in early February with a 12% surge to $14.
The February 8 update was made to stop the shares from continuing a post-Christmas slide, yesterday’s confirmation of what was a generally solid performance was therefore rather ho-hum to the market.
Not even a 13% jump in interest dividend to 26 cents a share could generate much enthusiasm and the shares ended up just 0.5% at $13.75 – still well under that February 8 close.
Premier’s half year profit came in under market estimates at $71.9 million compared to analyst estimates of more than $73 million, while underlying net profit before tax grew by 9.7% to $100.6 million in the half.
First half like-for-like sales increased by 2.1% with Smiggle sales jumping 26.4% in what was a record half for the brand and Peter Alexander sales up 13.8% in the period.
Both had been disclosed in the update on February 8. Total retail sales rose 7.1% to $588.6 million and it is clear that without the outperformance at Smiggle and Peter Alexander, the company would have struggled to meet the prior year’s levels.
Sales and earnings were impacted by one week’s less trading. Profit was also hit by the $3 million in legal costs incurred in an unsuccessful attempt to stop its former chief financial officer from taking a new job at rival Cotton On Group.
“These results were achieved in a half that saw several Australian discretionary retailers go out of business whilst others have reported significant decline in earnings,” according to Premier’s chairman. Solomon Lew.
“Premier Retail’s performance in the half shows the robust nature of our business resulting from key investment decisions made over the past five years in line with the business’s 2011 strategic review,” he said in yesterday’s statement.
Smiggle, its international growth brand will open its first store in Ireland in the second half of 2017, and Premier reckons it can grow to 15-20 stores in three years. Ireland the leading market for international online orders from the UK Smiggle site. Premier will join Harvey Norman as Australian retailers in the Irish market.
Premier, which also owns Just Jeans brands, blamed the lack of growth on a series of events that hurt momentum, including the temporary closure of four Hobart stores after a partial building collapse, the effects of the Wellington earthquake on its New Zealand arm and a cool start to the Australian summer, which forced many retailers into heavy discounting in the lead-up to the Christmas sales period.
Smiggle’s global sales rose 26.4% to $135 million, with 33 new stores, including 26 in the UK and seven in Asia, taking the number of stores opened over the last 12 months to 63. Just on 60% of Smiggle’s sales now come from outside Australia and sales in the UK are expected to reach $200 million by 2019, according to Premier management.
Peter Alexander’s sales rose 13.8% with solid same-store sales augmented by three new stores.
Sales also rose at Just Jeans (up 5%), but fell at Portmans, Dotti, Jacqui E and Jay Jays.
The group has $279 million net cash on its balance sheet and its 27% shareholding in appliance maker Breville is in the books at $218 million, but has a current market value of $364 million.
That (and over $200 million of franking credits) is why Premier is always mentioned as being a possible buyer or player in any retailing deal that is rumoured to be happening.
