If we are in the midst of a consumer spending recession, someone forgot to tell Premier Investments Limited (ASX: PMV) that as its management posted a record interim sales and earnings this morning.
I would be surprised if the PMV share price doesn't jump higher even though the stock is up over 12% since the start of 2019 as the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) index rallied 9%.
Stretched household budgets and the reversal of the "wealth effect" from falling house prices wasn't enough to stop Premier Investments from delivering a 13% jump in first-half net profit to $88.8 million – its best ever 1H result.
Multiple records broken
That isn't the only record it broke. Sales for the period improved by 8% to $680.2 million and management declared its highest ever interim dividend of 33 cents per share (fully franked).
This implies expanding margins and strong cash flow, which is just as or more significant than headline figures on their own.
There isn't much not to like about the results. Premier Investments recorded strong growth across all its apparel brands with record online sales and good growth momentum in its Smiggle and Peter Alexander businesses bolstering the record results.
No matter what you think of chairman Solomon Lew's reputation or Mark McInnes' inglorious exit from David Jones, the men have shown why they are among the best in the business as Premier navigates a challenging environment that includes the Brexit debacle (Smiggle has operations in the UK).
Smart investments?
It's also interesting to see that Premier has invested in another solid retail-exposed company Breville Group Ltd (ASX: BRG). The Breville share price is trading around a record high after it posted what I considered to be a very good profit result last month.
The outperformance of the BRG share price has no doubt given Premier a boot to its bottom line and Lew's investment in Myer Holdings Ltd (ASX: MYR) is also hurting a little less as the embattled department store seems to have turned a corner.
But the potential turnaround in Myer may be a double-edged sword given that Premier is probably hoping to buy over (or at least wield effective control) Myer on the cheap.
Foolish takeaway
It will be interesting to see if cashed-up Premier will be compelled to lob a takeover if conditions at Myer have finally bottomed.
Coming back to Premier's profits, I think it delivered a high-quality result and the stock looks to be a "buy" in my book as there's probably another 15% upside to yesterday's closing price of $16.51 before reaching fair value.
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