Why I think Premier Investments is the best retail share on the ASX

Here's why I think Premier Investments Limited (ASX: PMV) could be the best retail share listed on the ASX.  

| More on:
number 1 trophy

Image Source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The COVID-19 pandemic may have forced many retailers to close their doors forever. Despite the doom and gloom, I believe it is still possible for investors to find long-term value in the Australian retail sector.

Here's why Premier Investments Limited (ASX: PMV) could be the best retail share listed on the ASX.  

How has Premier Investments performed?

As the owner of prominent retail brands such as Smiggle, Peter Alexander and Just Jeans, Premier Investments has suffered the same fate as most retailers in Australia. The company recently released an update informing the market that sales had plunged 74% for the 6 weeks to 6 May 2020, with overseas sales tanking 99% in the same period.

In response to the pandemic, the Premier Investments share price had dropped more than 56% year-to-date by late March. Despite the sharp fall, the company's share price has recovered more than 87% from its low in March and is poised to continue as the Australian economy looks to restart.  

Billionaire owner taking fight to landlords

Billionaire Solomon Lew is the chairman of Premier Investments and has built his fortune working in the retail business over the past 50 years. Drawing on his wealth of experience, Mr. Lew has made it clear to commercial landlords that stores under Premier Investments will only pay rent in arrears based on a proportion of gross sales when they reopen.

In an article in The Australian, Mr. Lew stated that Premier Investments intends to do everything possible in order to get people back to work. The company was forced to stand down 9,000 employees last month as governments imposed restrictions to curb the pandemic.

What is the outlook for Premier Investments?

Despite the fall in sales, Premier Investments saw online sales surge more than 99% for the 6 weeks to 6 May 2020. The increase in e-commerce reflects the change the pandemic has had on consumer behaviour. Although Premier Investments' stores are largely brick and mortar stores, 70% of the company's leases in Australia and New Zealand expire in the near future.

As a result, Premier Investments has the luxury of adjusting its online and physical store mix. The company has also reassured shareholders of its strong balance sheet that has Premier Investments well placed to begin a recovery.

Foolish takeaway

In my opinion, Premier Investments is possibly the best retail share listed on the ASX. The company boasts a strong portfolio of competitive global brands and has the cash to capitalise on future opportunities.

In addition to its size, the company also boasts the flexibility to adapt to changing consumer behaviour and e-commerce facilities. Premier Investments also has an experienced board that gives the company the luxury of experience that not many ASX retail shares have.

As the Australian economy restarts, it is far from going back to business as usual. Now may not be the time to invest in retail, however, I believe it would be prudent to keep Premier Investments on your watchlist for the future.

Motley Fool contributor Nikhil Gangaram has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Premier Investments 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.

More on Retail Shares

A man eases back onto his sofa, happy with the relaxed vibe from his furniture.
Retail Shares

Why I just sold half my shares in this ASX 300 stock even though I still love it!

I’m still a big fan of this business.

Read more »

Two fashionable asx investors dancing among confetti.
Retail Shares

2 'very high-quality' ASX retail shares with significant inside ownership

A fund manager has named two appealing stocks to own.

Read more »

A man sits on a bench atop a mountain with a laptop, making investments with a green ESG mind.
Earnings Results

ASX All Ords stock KMD tumbles as interim dividend cancelled

Investors are hitting the sell button on ASX All Ords stock KMD today.

Read more »

Close-up Of Empty Shopping Cart Near Person's Hand Using Calculator Over White Desk
Retail Shares

Better buy: Coles or Woolworths stock?

Which stock should go in the shopping basket?

Read more »

Person handing out $100 notes, symbolising ex-dividend date.
Retail Shares

Why did Super Retail shares drop after going ex-dividend?

This is the story behind the decline.

Read more »

Happy couple doing online shopping.
Opinions

Is it too late to buy after the Kogan share price rocketed 90% in a year?

Is this online retailer still an investment opportunity?

Read more »

Two people comparing and analysing material.
Retail Shares

Better buy in March 2024: Wesfarmers stock vs JB Hi-Fi stock

Which of these two retail heavyweights would be a better buy?

Read more »

A man eases back onto his sofa, happy with the relaxed vibe from his furniture.
Share Gainers

If you'd put $30,000 in this ASX retail stock 11 months ago, you'd have $116,000 now

When battered stocks make a comeback, it happens very quickly. Here's a prime example.

Read more »