The shares of fashion retailer Premier Investments Limited (ASX: PMV) will be on watch today after the company provided a trading update on its first-half performance.
Due to speculation in the press around earnings risks for Australian retailers, the company decided to update the market in advance of its half-year results announcement in March.
For the six-months ended 28 January 2017, Premier Investments expects the following:
- Record total half-year sales of approximately $588.6 million. An increase of 7.1% on the prior corresponding period (pcp).
- Record underlying half-year earnings before interest and tax of between $92 million and $93 million.
- This equates to an increase of between 9.4% and 10.6% on the pcp figure of $84.1 million.
- Half-year results will be announced on Tuesday 21 March 2017.
Although growth has clearly slowed from this time last year, I think this is a solid result from the company and would expect the market to respond reasonably positively to it.
As of yesterday's close Premier Investments' shares were changing hands at 19x trailing earnings. I think this is more than fair for a company growing earnings in the double-digits. Especially with its shares expected to provide a fully franked 4.1% dividend over the next 12 months according to CommSec.
Unfortunately today's update was limited on detail so it is unclear where the growth is coming from exactly.
But I suspect that its key Smiggle and Peter Alexander brands will have contributed strongly to the result. Smiggle's international expansion in particular is a big reason I am attracted to the company.
At present there are 90 Smiggle stores operating in the UK, but management plans to surpass 200 stores in the country by the end of 2019. Further expansion in the Asia market is planned as well.
Is it a buy?
I think at the current share price Premier Investments offers investors value for money. Thanks to its strong brands I believe it has solid long-term growth prospects that make it a great buy and hold retail investment like Bapcor Ltd (ASX: BAP) and AP Eagers Ltd (ASX: APE).
