Premier Investments Limited (ASX: PMV) shares are really appealing to me as a long-term investment. Thus, I'm going to talk about some reasons why this stock excites me in this article.
The business is best known for being the owner of a number of different retail brands including Smiggle, Peter Alexander, Just Jeans, Jay Jays, Dotti and Jacqui E.
It also has a sizeable stake in appliance maker Breville Group Ltd (ASX: BRG) and Myer Holdings Ltd (ASX: MYR).
Let's get into three reasons to really like this business.
Image source: Getty Images
International growth
Australia is a great country to do business in, but it has a relatively small population. According to the ABS, the Australian population was 26.6 million at 30 June 2023. There are billions more potential customers outside of Australia and any ASX retailer that is displaying growth initiatives outside of Australia is a very attractive feature because it extends the company's growth runway.
The company is putting a lot of work into expanding Smiggle and Peter Alexander overseas. In the FY23 result, it said that Smiggle is exploring "compelling opportunities in both existing and potential new markets." It identified it could grow the Smiggle store count by at least a further 30 in existing markets in the near term, leveraging the existing team and infrastructure. It's looking at growing through standalone stores in various markets.
Premier Investments also said it was launching Peter Alexander with a global cross-border e-commerce platform provider to grow the brand across 35 countries. It's also opening new and larger format stores to "better showcase the wider product offering that has been developed in recent years."
Keep in mind that Breville is also growing its global presence as well, so Premier Investments is getting indirect international growth exposure through its investment.
All of these elements can help Premier Investments shares.
Strong digital profit margins
Premier Investments has done a very good job of growing its online sales since FY19, being before COVID-19. In FY23, online sales amounted to $324.7 million, which made up 19.8% of total FY23 sales, up from 11.7% in FY19. Online sales of $153.8 million in the second half of FY23 were up 6.3% year over year.
The business said it has made major investments in people, technology, its digital offering and marketing, while "continuing to deliver a world-class platform and customer experience."
Premier Investments said those investments have enabled the online channel to continue to deliver a "significantly higher earnings before interest and tax (EBIT) margin than the retail store network providing significant operating leverage for future growth."
This bodes well if online sales growth continues.
Commitment to shareholder returns
The business keeps shareholders in mind with nearly all of the strategic decisions.
It aims to keep the balance sheet in good shape but also pays owners of Premier Investments shares a good dividend each year.
There was a dividend increase in most years over the past decade, which is a good record. The COVID-hit year of 2020 saw a decrease, but the dividend quickly rebounded after that.
In FY24, the business is projected to pay an annual dividend per share of $1.20, according to Commsec, which would translate into a grossed-up dividend yield of 6.2%. That would be a solid yield, given the current economic environment.
