The Premier Investments Limited (ASX: PMV) share price has fallen 0.76% today despite reporting a record first-half of results in FY22.
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Premier Investments own several retail brands including Smiggle, Peter Alexandar, Just Jeans, Portmans, Jacqui-E, Dotti, and Jay Jays.
All eyes on the Premier Investment share price
Even a record first-half dividend couldn’t keep the Premier Investments share price up.
Key financial results for the first half ending January 31 include:
- Revenue of $769.9 million, up 0.6% year-on-year (YoY)
- Underlying earnings before interest and tax (EBIT explained) of $212.0 million, up 5.5% YoY
- Interim fully franked dividend of $0.46, up 35.3% YoY
Mandated COVID-19 restrictions severely impacted store hours, with Premier losing 42,675 trading days during the half.
Peter Alexander was the standout performer, increasing sales 11.4% last year and 57% since 2020.
Smiggle also returned to growth as children returned to classrooms.
Its apparel brands recorded a marginal uptick in growth, with Portmans the star achieving 16.4% growth.
Operating leverage on show
Today’s results demonstrated strong operating leverage (when revenue rises faster than costs) within Premier.
Online sales are now 25.4% of total sales, improving Premier’s margins as it doesn’t need to pay for store costs such as rent and staff.
Zooming out over two years, online sales have doubled and EBIT has soared 55%.
The retailer benefitted from a reduced cost of doing business in the half, primarily from rent reductions from landlords.
Premier has been unrelenting in negotiating lower rent. As a result, it has shut 67 unprofitable stores over the past two years.
“Pleasingly many landlords recognise the long term financial strength of Premier and its seven iconic brands”
What’s next for the Premier Investments share price?
Second-half trading has started strongly, with total sales up 6.2% on the same period last year.
The business has $468 million cash on hand however remains cautious of “highly uncertain times”.
Notably, Premier Investments may look to capitalise on this uncertainty:
“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”
The retailer already owns a 26% stake in Breville Group Ltd (ASX: BRG), which is now worth over $1 billion.
Chairman Solomon Lew has also been vocal in his interest for big-box retailer Myer Holdings Ltd (ASX: MYR).
Could Premier look to make a bigger splash in Myer? Or is another retailer in its sights?
Management also noted the potential for further development of its Australian distribution network.
Overall, if the business can keep setting record earnings and profits, the Premier Investments share price should continue to follow the same trend.
