Is the Premier Investments (ASX:PMV) share price a bargain buy?

Premier Investments has risen substantially. Is it a buy?

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The Premier Investments Limited (ASX: PMV) share price has gone up 46% over the last 12 months. But could the retail stock be a bargain buy for investors?

It has a number of different retail brands including Smiggle, Peter Alexander, Just Jeans, Jay Jays, Portmans, Jacqui E and Dotti. The ASX share also has substantial investments in Breville Group Ltd (ASX: BRG) and Myer Holdings Ltd (ASX: MYR).

What are analysts focusing on with the retailer?

It was only a couple of months ago that Premier Investments released its FY21 result to investors. That’s what has influenced analyst thoughts in recent times.

For example, both Credit Suisse and Morgan Stanley rate the business as a hold, but the price targets for the Premier Investment share price are lower than today’s level, at $28.74 and $26.75 respectively. That means both brokers are expecting Premier Investments shares to fall more than 10%.

Whilst those brokers thought the result was good, they are expecting the profit margins to somewhat reduce and demand to lower.

How did it perform in FY21?

Premier Investments reported that its statutory profit grew by 97.3% to $271.8 million.

The global retail sales of $1.4 billion went up 18.7%. Within that, Peter Alexander experienced record sales of $388.2 million, an increase of 34.7%. Apparel brands increased by 25.3% to $841.6 million.

It also experienced record sales of $300.7 million, up 36.4%, and contributed 20.8% of the global FY21 sales.

Premier Investment’s gross profit grew by 25.1% to $927.9 million, with the gross profit margin increasing by 331 basis points.

The Premier retail earnings before interest and tax (EBIT) grew by 88% to $351.9 million.

Is the Premier Investments share price a buy?

The brokers at Macquarie Group Ltd (ASX: MQG) currently rates Premier Investments as a buy, with a price target of $33, which is slightly higher than where it is now.

Macquarie also thinks that Premier Investments will probably see its margins revert to a more level.

However, analysts think there is going to be a high level of demand at its stores with lockdowns ending. The company has done the right thing by ensuring it has enough stock for the rest of 2021.

Using Macquarie’s estimates, the Premier Investments share price is valued at 24x FY22’s estimated earnings.

Trading update

Premier Investments told investors how it had done in the first seven weeks of its FY22 when it released its FY21 report.

It said that its retail store week was being disrupted by lockdowns, with 661 stores temporarily closed. However, those stores have been reopening.

The lost sales for those stores have been partially offset by “strong” global online sales which were up 44.6%. Smiggle Europe is also rebounding. For that seven-week period, total global online sales were down 9.5%. However, it did say that its online business continues to “accelerate” the EBIT margin “significantly higher” than the store network.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Macquarie Group Limited and Premier Investments Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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