Smiggle and Peter Alexander owner, Premier Investments Limited’s (ASX: PMV) share price has moved into the green today after the company announced a record FY21 profit.
Currently, the Premier Investments share price is up 3.54% to $27.76.
Another lockdown? Another set of PJ’s?
Key highlights from the financial year ending 31 July 2021 include:
- Revenue of $1.458 billion, rising 16.8%
- Gross profit of $927.9 million, up 25.1%
- Online sales of $300.7 million increasing 36.4%
- Net profit after tax (NPAT) of $271.8 million, rocketing 97.3% on FY20
- Cash on hand of $523.3 million
- Total full-year dividends of 80 cents per share fully franked, up 14.3%
The standout performer was sleepwear retailer Peter Alexander, which delivered $100 million in sales growth over FY21.
Notably, all seven brands except Smiggle recorded double-digit sales growth.
The relative underperformance of Smiggle – which recorded negative sales growth of 16.8%, was attributed to ongoing pandemic-induced school closures.
Children attending school is the main driver of Smiggle sales. With COVID-19 forcing children (and parents) into home-schooling, sales dropped.
Online sales spur margin expansion
The big jump in profit relative to revenue is attributed to a growing proportion of online sales. Purchases made online are significantly higher margin for Premier, as it does not need to spend money as much more on staff and rent.
While most retailers focus on expanding their store footprint, Premier Investments has closed 158 stores over the past seven years. 46 store closures occurred over the past 12 months, with management citing individual store profitability as a key focus.
Also contributing to margin expansion is the renegotiation of rents with landlords. Premier has reduced its rent as a percentage of sales by 3.39%. This means for every $100 of pyjamas sold, Premier keeps an additional $3.39 which flows to the profit line.
“Today’s announcement is a testament to the skills and dedication of our entire global team. To have delivered these record results in a very difficult and volatile environment is a truly outstanding achievement” – Chairman, Solomon Lew
Store closures impact start to FY22
Due to government-mandated lockdowns across Australia and New Zealand, 661 stores have been closed representing 56% of the global store network.
Subsequently, over the past 7 weeks, total sales were down 9.5%. On a positive note, online sales continue to gain traction up 44.6% over this period.
No full-year guidance was provided.
My take
A great result by Premier. Impressively, despite more than half its store network being shut, sales are only down 9%.
I’ll need to go back and redo my valuation for the business to see if today’s $27 share price offers upside potential.
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