Premier Investments Limited (ASX: PMV) operates a number of specialty retail fashion chains in Australia, New Zealand, Singapore and via a joint venture entity in South Africa. It currently has seven brands including Just Jeans, Jay Jays, Dotti, Portmans, Jacqui E, Peter Alexander, and Smiggle trading from more than 1,000 stores throughout these four countries.
Performance
The company's had a cracking 12 months, with its share price soaring 15%* overall. In fact, it completely dominates the speciality apparel store space, where other specialty retailers, Specialty Fashion Group Limited (ASX: SFH) and OrotonGroup Limited (ASX: ORL) have been hammered, down 26%* and 28%* respectively.
Premier has crushed the S&P/ASX200 Index (Index: ^AXJO) (ASX: XJO) by a whopping 32%* in the past 12 months, and pummeled the customer discretionary sector by almost 20%.*
International Expansion
Premier recently updated the market on its international expansion plans, with the company poised to accelerate the U.K. expansion of its Smiggle brand in fiscal 2016.
While Smiggle opened 24 new U.K. stores in fiscal 2015, this is expected to accelerate to 40 from this year. This pace of new store openings is set to continue until the brand reaches its long-term objective of 200 stores in the U.K., from which the company expects to generate $200 million of sales within five years.
The U.K. expansion via Smiggle is progressing well, currently representing just over 10% of its business.
Strong track record
The global financial crisis provided some excellent buying opportunities but the problem for most investors, both private and institutional, was the lack of spare cash available for additional investment. Premier did not have that problem, with strong cash reserves available for acquisitions and growth, even after completing the Just Group acquisition in August 2008.
This share suits investors seeking retail exposure who are comfortable backing Solomon Lew's retail track record.
Its core strength in recent years has been its ability to refresh stores and brands, invest in online platforms and capitalise on fashion trends to stay ahead of competitors. However, the company must consistently design appealing fashion lines to stay relevant.
Committed to online development
The Internet has fragmented domestic retail brands across the international retail market place. Premier was slow to accept the relevance of the online channel, but is now committing capital to develop online stores for all seven brands. Management has an aspirational target of 10% of sales from online channels, though there is no timeframe for this goal.
Other key points:
- Owning its own brands provides control in product placing and pricing to offset discounting from online competitors
- Its large cash balance provides fire power to acquire distressed brands
- A developed integrated retail platform will offer opportunities to add more brands to drive greater asset utilisation
Valuation
The company's currently sitting on a p/e of 20, which is around the sector p/e, it has strong operating margins around 15%*, and EPS growth of 12.3%*.
(*Source:Commsec)
