In morning trade the Premier Investments Limited (ASX: PMV) share price has pushed higher following the release of its full year results.
At the time of writing the retail conglomerate's shares are up 1% to $19.67.
What happened in FY 2018?
In FY 2018 Premier Investments achieved sales of $1,182 million and a reported net profit after tax of $83.6 million. This was an 8.2% increase and a 20.5% decline on the prior corresponding period.
The reason that the company's earnings fell heavily was due to a non-cash impairment expense of brand names within the Casual Wear cash generating unit of $30 million. Management advised that the decrease reflects the increasingly competitive retail landscape and structural changes impacting the apparel industry in Australia and New Zealand.
The company neglected to provide an underlying profit after tax figure, but based on the same tax rate I estimate it to be approximately $110.2 million. This would mean an increase of 4.8% year on year.
It would also equate to underlying earnings per share of 69.35 cents, compared to reported earnings per share of 52.6 cents.
This is still well short of Goldman Sach's forecast of net profit after tax of $120.5 million and EPS of 75.9 cents in FY 2018.
What were the drivers of its growth?
One key driver of its growth was the online channel. Premier Investments smashed its 2020 target of $100 million in annual online sales two years early. It grew online sales by 65.3% to $112.5 million in FY 2018.
Once again the company's Smiggle brand was a strong performer. Smiggle achieved record global sales of $293 million, up 22.7% on FY 2017. The brand opened 52 new stores globally and online sales exceeded 10% of sales in countries with a transactional website. Approximately 67% of the brand's sales were delivered from outside of Australia.
Limited like for likes sales data was provided for Smiggle, which may be an indication that this metric is slowing.
Another highlight was the Peter Alexander brand which also delivered record sales in FY 2018. They came in at $218.7 million, up 14.5% on FY 2017 and up 31% over two years. Both total sales and like for like sales were strong for the year.
This was supported by solid growth from its Portmans and Jacqui E brands, which offset sales declines from the struggling Just Jeans, Jay Jays, and Dotti brands.
The company's positive overall performance and strong balance sheet allowed the Premier Investments board to declare a final fully franked dividend of 33 cents per share. This brought its full year dividend to 62 cents per share, up 17% on last year's pay out.
Trading update.
Premier Investments' global sales for the first five weeks of FY 2019 were up 10.2% on the prior corresponding period with an improved gross margin. This five-week sales growth number includes Smiggle's key UK and Republic of Ireland "back to school" period where sales were up 29%.
No guidance was provided for the year ahead.
Should you invest?
I thought this was a decidedly weak full year result and I'm surprised to see its shares push higher today.
And while it is pleasing to see that the company has had a strong start to the year, it isn't enough for me to want to buy shares today.
At 28x estimated underlying earnings, I think Premier Investments's shares look quite expensive. In light of this, I would suggest investors consider other retail shares that arguably offer more value for money such as Adairs Ltd (ASX: ADH), Noni B Limited (ASX: NBL), or Super Retail Group Ltd (ASX: SUL).
