Premier Investments Limited (ASX:PMV) shares edge higher on full year results release

Source: PMV presentation

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).

Alternatively, this dividend share could be a great option for investors this month if you ask me.

OUR #1 dividend pick to grow your wealth now is revealed for FREE here!

You might not know this market leader's name, but it's rapidly expanding into a highly profitable niche market here in Australia. Even better, the shares boast a strong, fully franked dividend that should balloon in the years to come. In other words, we're looking at the holy grail of incredible long-term growth potential AND income you can watch accruing in your account in real time!

Simply click here to grab your FREE copy of this up-to-the-minute research report on our #1 dividend share recommendation now.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Premier Investments Limited. The Motley Fool Australia owns shares of Super Retail Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.