Premier (ASX:PMV) share price on watch after earnings beat and record dividend

This retailer had a strong half despite lockdowns…

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Key points

  • Premier had a strong half despite losing countless days to COVID lockdowns.
  • The retail giant narrowly beat its earnings guidance for the half.
  • The second half has started positively, with sales up 6.2% during the first five weeks.

The Premier Investments Limited (ASX: PMV) share price will be one to watch on Friday.

This follows the release of the retail conglomerate's first half results.

Premier Investments share price on watch after outperforming guidance

  • Premier Retail global sales up 0.6% to $769.9 million
  • Online sales up 27.3% to $195.4 million
  • Online sales now represent 25.4% of Premier Retail sales
  • Premier Retail earnings before interest and tax (EBIT) up 5.5% to $212 million
  • Group net profit after tax down 13% to $163.6 million
  • Interim dividend up 35.3% to a record 46 cents per share fully franked

What happened during the first half?

For the six months ended 29 January, Premier reported a modest 0.6% increase in global sales to $769.9 million. This was driven by its online businesses, which delivered a 27.3% increase in sales to $195.4 million and helped offset the loss of 42,675 trading days. This means that online sales now account for a total of 25.4% of Premier Retail sales.

Key drivers of its sales growth were Peter Alexander sales of $227.4 million (up 11.4%) and positive momentum from its Smiggle business, which reported a 5.6% improvement in sales.

As for earnings, a 119 basis point lift in Premier Retail's EBIT margin underpinned a 5.5% increase in its EBIT to $212 million. This was a touch ahead of management's guidance of $209.5 million and $211.5 million.

Premier is also a major shareholder of Breville Group Ltd (ASX: BRG). The company's share of profit after tax of its associate for the period was $20.35 million, up from $16.85 million a year earlier. It also received dividends from Breville totalling $4.9 million for the six months.

This ultimately led to group net profit after tax of $163.6 million. And while this is down 13% over the prior corresponding period, it didn't stop the company from increasing its fully franked interim dividend by 35.3% to a record 46 cents per share.

Management commentary

Premier's Chairman, Solomon Lew, commented: "1H22 was one of the most challenging and unpredictable halves of the pandemic. Under government mandates, stores in our largest markets were shut for most of the first quarter equating to 42,675 trading days during the period. In the final two months of 1H22, we managed the impacts of the Omicron variant across our entire global business. Despite these challenges, Premier has once again delivered outstanding results, reflecting the high calibre of our Board, our talented senior management team, and the commitment and dedication of our team members across the globe."

This sentiment was echoed by Premier Retail's CEO, Mr Richard Murray.

He said: "We are delighted with Premier Retail's strong 1H22 result which was achieved despite the volatile trading environment. The Group has had to pivot rapidly during 1H22 to combat numerous logistical challenges in the face of lengthy government mandated lockdowns and the emergence of the Omicron variant during the latter part of the half. This result has been delivered through rigorous planning and execution across all areas of our business. It was particularly pleasing to see the record results from Peter Alexander, Portmans and Online. Further, the Smiggle business has shown positive momentum during the half as children have returned to school and COVID-19 restrictions have eased."

Outlook

No guidance was given for the full year due to the volatile operating environment. Though, management revealed that the second half has started positively. It advised that Premier Retail global sales were up 6.2% during the first five weeks of the half.

In addition, due to the strength of its balance sheet, the company appeared to hint that it could be on the lookout for acquisitions.

It said: "The Premier Board remains optimistic about the Group's ability to continue to deliver, however also recognises the Group is operating in highly uncertain times. The Board notes that the environment, whilst challenging for many businesses, may present new opportunities for the Group given the strength of its Balance Sheet."

Motley Fool contributor James Mickleboro 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 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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