So far this year the Premier Investments Limited (ASX: PMV) share price has underperformed the Australian share market with a 7% decline.
Just two months ago this was significantly worse, but thanks to a 9% gain during this period its shares have managed to close the gap.
Are there more gains ahead?
With its shares changing hands at approximately 18x estimated full-year earnings, I think Premier Investments is still relatively cheap based on its current growth profile.
During the first-half of FY 2017 the company grew its earnings before interest and tax by approximately 11% on the prior corresponding period.
Pleasingly, I expect the aggressive international expansion of its high margin Smiggle brand will allow the company to carry on growing earnings at this rate for at least the next two to three years.
After all, Smiggle's UK expansion alone is on course to generate $200 million in annual sales by 2019.
Although the company doesn't break-down sales by region, I would estimate that sales in the UK were around $40 million during the first-half. Annualised this equates to $80 million, meaning sales in the country are on course to grow 150% over the next couple of years.
And that's just the UK. The brand is growing its footprint in Europe and Asia as well.
Furthermore, the company's other marquee brand, Peter Alexander, continues to go from strength to strength. It posted a 13.8% lift in first-half sales thanks partly to strong like-for-likes sales growth.
What about Amazon?
It is impossible to consider an investment in a retailer without first considering the impact that retail behemoth Amazon would have on it.
While not all of its brands are Amazon-proof, I feel confident that both Smiggle and Peter Alexander are safe.
Smiggle is already operating successfully in a UK market which Amazon has a stranglehold on. And being a niche retailer, I feel Peter Alexander is less likely to be disrupted by the retail giant.
As these two brands generate the bulk of its profits, I'm therefore not as concerned on the Amazon impact as I am with retailers such as Myer Holdings Ltd (ASX: MYR) and JB Hi-Fi Limited (ASX: JBH).
Overall, I think Premier Investments could be a solid buy and hold investment today and certainly one of the best options in the retail industry.
