The S&P/ASX 200 Index (ASX: XJO) share Premier Investments Limited (ASX: PMV) has seen a major sell-off. It has dropped around 25% from March 2023, putting the company at a much cheaper price.
While Premier Investments isn't a recognisable name for households, it operates a number of different retail brands including Smiggle, Portmans, Just Jeans, Peter Alexander, Jay Jays, Jacqui E and Dotti. It also has a sizeable stake in both Breville Group Ltd (ASX: BRG) and Myer Holdings Ltd (ASX: MYR).
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What has happened to the Premier Investments share price?
It has fallen heavily this year as the ASX retail share suffers from market uncertainty regarding household spending following inflation and higher interest rates.
With people now spending more on food, energy, rent and interest rates, there could be less money to spend on things like clothes.
It will be interesting to see whether the business is able to continue to report good numbers, or if it will report lower earnings, like what seems to be happening to names like Adairs Ltd (ASX: ADH) and Universal Store Holdings Ltd (ASX: UNI).
A few months ago, when the ASX 200 share released its FY23 half-year result, the Premier CEO Richard Murray said:
We have opened the second half strongly and are well-positioned to drive growth from our powerful retail model. We remain focused on continuing to deliver relevant and quality products, enhancing our digital offering, optimising our store portfolio and identifying new store opportunities to support growth. We are also focused on identifying and executing new offshore market opportunities for Smiggle and Peter Alexander.
That opening sentence seemed positive. Total sales in the first six weeks in the second half of FY23 were up 7.7%.
Is the ASX 200 share a buy?
The company's earnings are expected to remain quite resilient based on the current projections. FY24 earnings per share (EPS) are only expected to fall by 9%.
Its earnings could continue to perform strongly, in my view, if it can keep selling a good amount of its products online because it can come with a higher profit margin than in-store sales.
Same-store sales may suffer in a period of economic weakness, but the ASX 200 share can continue to expand overseas with Smiggle and Peter Alexander, which is very promising for longer-term overall sales and earnings. Premier Investments continues to open new stores, boosting its scale. I think Smiggle's earnings may be more resilient than its other brands because (school) items for kids seem a bit more defensive.
I don't think that the retail outlook will always look this cloudy for retailers, so in two or three years the Premier Investments share price could rebound as more people go to shops again and open their wallets.
The valuation and the dividend yield look very attractive to me. According to Commsec numbers, the Premier Investment share price is priced at just 13 times FY25's estimated earnings and a potential FY25 grossed-up dividend yield of 7.3%.
