Premier Investments issues special dividend, flags $50m buyback following strong FY22 result

Premier Investments (ASX: PMV) was up around 12% at noon following revelations that the Solomon Lew-controlled fashion chain conglomerate (including brands like Just Jeans, Peter Alexander and Smiggle) had beaten market consensus of $248.1m with a 4.91% lift in net profit to $285.17m, on the back of a 3.94% rise in full-year revenue to $1.5bn.

The group, which operates more than 1,100 stores in six countries, rewarded shareholders with a special dividend of 25c per share, in addition to a final dividend of 54c per share (payable on January 25), lifting total dividends for the year 56% to $1.25 per share.

While the group’s portfolio of seven iconic brands continued to perform well, designer sleepwear brand Peter Alexander was the standout brand for the retail group, with a record $428.5m in sales, up 11.4% on the previous year.

Other highlights within the full year FY22 result include:

• Retail earnings (EBIT) excluding significant items was $335.0m, up 10.1%

• Smiggle sales rebounded nearly 25%

• Online sales, which comprise about 22.7% of total sales, were up 14.3%

• Gross margins of 64.8%, up 52 basis points on previous year

• 25.62% stake in Breville Group (ASX: BRG), market value at July 30 of $760.3m

• A $75.9m investment in Myer Holdings (ASX: MYR) at the end of FY22

• Global like-for-like sales up 5.4% on FY21

• Cash on hand of $471.3m at end of FY22 and property related debt of $69m

Looking forward

Recently appointed Premier Retail CEO Richard Murray advised investors that sales for the first seven weeks of the new year were up 47% on the previous year which was significantly impacted by covid-related store closures.

Murray expects the group’s unique retail model to help drive growth in FY23 and pointed to ongoing collaborations between Smiggle and Disney Studios, BBC studios Universal Studios and its first successful collaboration with the NFL.

Murray also notes new larger format stores are being considered for Peter Alexander plus offshore expansion for the brand.

"The strong start to first half and clean inventory position has given the group confidence that it is well positioned to drive sales through the critical Black Friday, Cyber Monday, Christmas, Boxing Day Sales and ‘Back to School’ trading periods ahead,” Murray noted.

Buyback

The group also flagged plans to buy back up to $50m worth of stock over the next 12 months.

Management believes the on-market share buyback recognises the significant market volatility at present, while also allowing Premier to opportunistically and flexibly acquire shares, which will in turn deliver earnings per share accretion and increase total shareholder returns.

What brokers think

Premier’s share price is down -20% over one year.

Consensus on Premier is Moderate Buy.

Based on Morningstar’s fair value of $24.41 the stock appears to be undervalued.

Goldman Sachs has a Neutral rating and target price of $19.50.

Based in the six brokers that cover Premier (as reported in by FN Arena) the stock is currently trading with 9.5% upside to the target price of $25.68.

Premier Investments share price over 12 months.