The Premier Investments Limited (ASX: PMV) share price is under the spotlight today after reporting its FY21 half-year result. Is it good value?
What did Premier Investments report in HY21?
Premier retail global sales increased by 7.2% to $784.6 million, with global like for like sales up 18.2%.
Peter Alexander was a particularly strong performer with sales rising 43.4% to $207.7 million. It saw growth across all product categories and channels.
The apparel brands of Just Jeans, Jay Jays, Jacqui E, Portmans and Dotti saw overall sales growth of 10.4%.
However, Smiggle struggled in the face of closed schools and parents not wanting to shop with their children. Even so, Premier said Smiggle was able to deliver like for like sales growth of 4.7% in Australia and 9.2% in New Zealand.
It was the profit margins that saw a particular boost – the gross margin increased by 286 basis points (2.86%), whilst the EBIT margin (EBIT explained) improved by 1,308 basis points (13.08%).
The huge increase of margins helped EBIT rise by 88.5% to $237.8 million and statutory net profit grow by 88.9% to $118.2 million.
Online sales growth was strong and continues to deliver EBIT margin than retail store sales. Online sales went up 61,3% to $156.7 million – this contributed 20% of total sales for the half.
Premier Investments’ dividend and balance sheet
The retail business revealed a few positive things for investors.
Its investment in Breville Group Ltd (ASX: BRG) is now worth over $1 billion, though the balance sheet only reflects the investment of $268.1 million.
Premier Investments also had cash on hand of $497.2 million at the end of the first half.
Due to the fact that the COVID-19 pandemic is still ongoing, the board decided to maintain the interim dividend at 34 cents per share.
Not giving jobkeeper back
Premier Investments pointed to the store closures during the period, particularly in Victoria, which led to a $28.5 million loss of gross profit which more than offset the eligible wage subsidy support recognised during that period.
It also said that it continued to pay employees their wages whilst various states shut stores over the last six months.
Trading update
In the first seven weeks of the second half of FY21, like for like retail sales grew by 27.6% compared to last year.
My thoughts on the result and the Premier Investments share price
Premier Investments has been a strong performer with its online sales during this difficult period. It’s no wonder physical retail stores are suffering, with foot traffic lower in shopping centres across the world. But Premier Investments has been one of the ASX shares to fight hardest for lower rents.
Using the pre-open Premier Investments share price, CommSec’s numbers show that it’s valued at 16 times the estimated earnings for the 2021 financial year. However, I’m not sure how long this elevated level of retail sales growth can last. But, a resurgent Smiggle could be able to help overall earnings in FY22. It could be one to watch if margins can stay high in FY22.
