Retail business Premier Investments Limited (ASX: PMV) has reported its FY20 result showing strong profit growth.
Premier Investments owns various brands including Smiggle, Peter Alexander, Just Jeans, Jay Jays, Dotti and Portmans.
Premier FY20 result
Premier Investments reported that total sales were down 4.3%, though retail like for like sales grew 7.6% in constant currency terms.
It saw record online sales of $220.4 million, up 48.8%. The second half of FY20 saw online sales growth of 70%. Online sales contributed around a quarter of sales in the second half of FY20.
The retail business also boasted of record sales for Peter Alexander of $288.2 million, up 16.3%. In the final ten weeks of the second half of FY20 as stores reopened, its apparel brands business saw like for like sales growth of 14.1%>
Premier Retail’s underlying EBIT (click here to learn what EBIT means) rose 11.9% to $187.2 million. The online channel continues to deliver a “significantly higher” EBIT margin compared to the retail store channel. Online sales are up 92% in the first six weeks of FY21 compared to last year.
Net profit after tax (NPAT) increased by 29% to $137.8 million.
This result was clearly affected by COVID-19 impacts. There was widespread store closures and the company continues to look at its physical store network. Smiggle was hurt with schools closed and families not wanting to shop in stores.
The company is going to close its final 4 stores in Hong Kong by the end of October 2020. It’s going to close 55 out of 131 UK stores in FY21 and impair all of its UK assets. It’s going to impair all of its store assets in Hong Kong, Singapore, Malaysia and Ireland. But it will keep investing in Smiggle for growth.
Over 70% of the company’s overall store network in Australia and New Zealand are either in holdover or have leases expiring in 2020.
It’s trying hard to get landlords to lower rents. The company stated: “While it is not Premier Retail’s objective to close any stores, should landlords not accept the major shift in consumer shopping behaviour and adjust their rents according to consumer shopping preferences, store closures will be inevitable. Premier Retail’s underlying FY20 EBIT result includes a $8.7 million channel optimisation expense to potentially close up to 350 stores in Australia and New Zealand. In addition, the group has taken the necessary store asset impairments to close stores if suitable rental agreements cannot be reached.”
Investments
A key part of Premier Investments is its investment in Breville Group Ltd (ASX: BRG). On the balance sheet the Breville shares are only worth $257.4 million. However, the market value of those shares is $1 billion at 11 September 2020.
Dividends
The Premier board has declared a final dividend of 36 cents per share, bringing the full year dividend to 70 cents per share, the same as last year.
Summary
This was a strong result considering the there’s a global pandemic going on. Growing profit by 29% is good, with a realisation that online sales are better value than in-store ones. It will be interesting to see if Premier Investments is successful with its rent reduction campaign.
I’m not sure if the strong retail environment will continue into FY21 as government stimulus wears off. For that reason, I’m not sure if Premier Investments’ shares are a buy today. There are other ASX growth shares I’d buy first like Pushpay Holdings Ltd (ASX: PPH) or even City Chic Collective Ltd (ASX: CCX).
