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Premier Investments Limited jumps 8% – should investors join the party?

Premier Investments Limited (ASX: PMV) is the company behind retail stores including Just Jeans, Portmans, Peter Alexander and Smiggle. Like its fellow specialty retailer Kathmandu Holdings Ltd (ASX: KMD) the company has reported a solid set of results. The profit results have impressed investors who have responded by sending the share price up 8% to within a whisker of its 52-week high.

The highlight of the result was the strong growth in earnings per share which grew 12.2% on the previous corresponding period. Other positives included growth in retail sales of 5.3% and a fully franked interim dividend of 20 cents per share.

Premier Investments also continues to maintain a robust balance sheet. The company has around $318 million of cash with just $77 million of debt and a holding in small appliance manufacturer Breville Group Ltd (ASX: BRG) which is currently worth $319 million. To top it off there are also $209 million of franking credits waiting to be distributed to shareholders.

Adding to the positive sentiment surrounding the interim results is a report in The Australian Financial Review focussing on speculation that Premier could be eyeing a takeover of David Jones Limited (ASX: DJS), which was recently outed for being approached by rival department store operator Myer Holdings Ltd (ASX: MYR) regarding a merger of equals.

Foolish takeaway

With billionaire investor Solomon Lew at the helm of Premier, shareholders know they are in good hands. The combination of a rock-solid balance sheet with the fire power to make acquisitions, growing revenue and earnings within its own portfolio of businesses, and struggling competitors ripe for the picking makes for an appealing investment thesis. Despite the share price jumping higher, there would appear to still be good reasons to consider buying in at this point.

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Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.

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