In morning trade the Premier Investments Limited (ASX: PMV) share price has fallen 3% to $13.35 after the specialty retailer posted record revenue of $1,092.8 million and underlying net profit before tax of $146.8 million for the 52 weeks ended 29 July 2017. This was an increase of 5.7% and 5.8%, respectively, on FY 2016's result.
This allowed the Premier board to increase its final dividend by 8% to 27 cents per share fully franked, bringing its total full-year ordinary dividend to 53 cents per share fully franked.
The main catalysts for this growth were the strong performances of its Smiggle and Peter Alexander brands despite the challenging consumer backdrop. Smiggle's global sales grew 28.8% to a record $238.9 million thanks to the opening of 58 new stores globally and strong like-for-like sales growth in all countries. It was a similar story with the Peter Alexander sleepwear business which posted sales of $190.9 million, up 14% year-on-year due to solid like-for-like sales growth and the opening of 11 new stores.
Pleasingly, Premier Investments' online channel performed exceptionally well during the year. Total sales came in at $68.1 million, up 44.3% on FY 2016. According to management, this was well ahead of the market growth. In light of this strong growth, management expects its online sales to exceed the original target of $100 million earlier than its 2020 target.
Elsewhere, the Just Jeans and Jay Jays businesses delivered solid results despite operating in competitive markets. While the Portmans and Jacqui E businesses have struggled, there are positive signs that both brands are turning their performances around successfully. Portmans has returned to positive like-for-like growth over the last seven weeks of trade and Jacqui E is expected to do the same by the second-quarter of FY 2018.
Unfortunately, the same cannot be said for its Dotti brand due to landlords incentivising fast fashion competitors in with lower rents. Management has warned that if its existing stores do not receive the same treatment from landlords, it may be forced to close many of its Dotti stores. One positive, though, is that Dotti online goes from strength to strength and enjoys a higher margin that the retail side of the business.
Looking ahead
Management continues to see Smiggle, Peter Alexander, and its online channel as the key drivers of long-term growth.
The company aims to open 100 to 120 new Smiggle stores in existing markets over the next two years. On top of this, this morning it announced that it plans to take the business into Continental Europe, with the first stores due to open in the Netherlands and Belgium in 2018. This is expected to result in Smiggle sales exceeding $400 million by FY 2020.
By FY 2020 the Peter Alexander brand is expected to be generating annual sales of $250 million thanks to the opening of 40 new stores over the next three years and the launch of three new merchandise initiatives. These include the launch of Bath & Body, a plus size expansion and a childrenswear expansion.
No guidance for FY 2018 was provided by management.
Should you invest?
Based on its full-year diluted earnings per share of 66.3 cents, Premier Investments' shares are changing hands at approximately 20x earnings.
While this is a premium over the retail industry and reasonably expensive given its single-digit growth, I believe that the company's long-term growth plans go some way to justifying it.
Although management hasn't provided guidance for FY 2018, I feel confident that the impressive growth of both Smiggle and Peter Alexander will be supported by an improved performance in the rest of the business.
All in all, I expect this to result in a stronger performance next year which could lead to double-digit earnings growth once again. This could make it worth considering as an investment today.
