The Premier Investments Limited (ASX: PMV) share price was on form on Wednesday following the release of its half year results.
The retail conglomerate's shares rose over 2.5% to end the day at $23.84.
How did Premier Investments perform in the first half?
Premier Investments was a very positive performer during the first half of FY 2021.
It reported a 7.2% increase in global sales to $784.6 million and an 88.9% jump in net profit to $188.2 million.
Key drivers of this growth were its Peter Alexander business, wage and rent subsidies, and a significant lift in online sales across the business. This helped offset weakness in the Smiggle business caused by COVID-19.
Can the Premier Investments share price climb higher?
According to one leading broker, the Premier Investments share price may have peaked and could come under pressure in the near future.
A note out of Goldman Sachs this morning reveals that its analysts have retained their sell rating and cut their price target to $20.20.
Based on the current Premier Investments share price, this implies potential downside of 15.3% over the next 12 months.
What did Goldman say?
Goldman commented: "PMV's 1H21 earnings continue to benefit from wage and rent subsidies of c. A$15.6mn and c. A$26mn. We adjust for these subsidies in our forecasts, and our revised EBIT forecasts imply a 4 year CAGR of 3.8% over FY19-23e."
It appears to believe that this growth rate isn't enough to justify its shares trading at 23x estimated FY 2022 earnings.
In addition to this, Goldman has concerns over the outlook of the key Smiggle business.
Its analysts explained: "The outlook for Smiggle will be volatile as European stores remain closed for much of the remainder of FY21, although back to school in the UK could provide a late swing to sales. We revise our sales forecasts for Smiggle by -14.5% in FY21 but less materially at -4.5% in FY22, as we update for the ongoing store closures in Europe before a forecast recovery into FY22."
The broker also believes that the Peter Alexander business will struggle to maintain its level of sales post-COVID.
Goldman said: "We revise Peter Alexander sales by +9.2% in FY21 reflecting the stronger momentum in sales to date. However, expectations are unchanged from FY23 as we expect the significant increase in FY20 and FY21 to be difficult to sustain beyond the short term."
Overall, the broker sees more value in other retailers than it does in the current Premier Investments share price.
