Premier Investments Limited (ASX: PMV) shares are up after the retail business provided a trading update.
Trading update
The company is holding its annual general meeting (AGM) for shareholders today.
It said that Premier Retail has achieved record trading on Black Friday and Cyber Monday. Globally, Premier Retail’s online sales for the first 18 weeks of FY21 increased by 70% compared to the same period last year.
Premier’s Chairman Solomon Lew said that one feature of Premier’s performance through the online channel is the significantly higher EBIT (EBIT explained) margins compared to the physical stores. He said that the performance of its online channel growth hasn’t been an accident. Over the past nine years, Premier has made a significant investment in a distribution centre, with investments in its digital capability and IT infrastructure.
Mr Lew also said that through a combination of board experience and outstanding management leadership, the business is exceptionally well positioned as it enters the critical holiday trading period.
Premier reminded investors at the AGM that the second half of FY20 was severely impacted by COVID-19, but it proved to be resilient in the face of adversity.
What to make of this
Considering Premier’s online sales are so much more profitable than in-store sales, this is a good development for the company. It justifies the continuing closure of stores where the landlord is charging too much, and it gives Premier more leverage to argue for lower rent because it can simply shift to online sales.
Over the years, I think Premier Investments has proven to be a very skillful retail business. Its investment in Breville Group Ltd (ASX: BRG) has also proven to be a very good choice. At the year end, its investment was worth $947.9 million when its balance sheet cost base is ‘only’ $257.4 million.
I think that Premier Investments has an impressive portfolio of brands that can keep growing in Australia and globally. The fully franked dividend yield of 3% is also helpful for shareholder returns. According to CommSec, Premier is priced at under 19 times the estimated earnings for the 2023 financial year.
But there are other ASX growth shares in the retail space that could also be worth watching including City Chic Collective Ltd (ASX: CCX) and BWX Ltd (ASX: BWX).
