Premier Investments (PMV)
BUY

Flying the coop?

 21 Aug 2023
Sector: Consumer Discretionary

TRADING UPDATE

Need To Know

  • CEO Richard Murray resigns.
  • Strategic review to consider possible demergers.
  • Trading update indicates consensus forecasts are too low for FY23.

Investment Implications

CEO Richard Murray has resigned effective 15 September after just two years at PMV. CFO John Bryce will step in while a replacement is considered. The change was not fully explained, but PMV coincidentally announced it would begin a strategic review of the business which could bring big changes to the group.

PMV will consider demerging Peter Alexander, or Smiggle or both. PMV did not indicate if the review will consider the investments in Breville Group (25.6% worth $846m) and the stake in Myer (26% worth $134m) although we expect that it surely will.

PMV has for some time talked about the potential for Peter Alexander to expand offshore after several years of stellar growth in Australia. PA has 122 stores (107 Australia, 15 NZ) and PMV has signalled 20-30 new domestic stores with a partnership model internationally.

Smiggle has already shown its potential for international expansion in the UK and Asia, but this has been interrupted by COVID. At 306 stores in FY22, with 146 of these in ANZ, and a marketing agreement with Disney. PMV is probably thinking Smiggle’s potential is yet to be fully realised and perhaps it might be better under a standalone structure.

The core retail division that contains the longstanding brands of Just Jeans, Jay Jays, Portmans, Dotti and Jacqui-E is a mature set of brands with limited growth potential, in our view. Store count and earnings have been largely static for several years.

Separately, PMV gave a trading update that said FY23 EBIT would be $355-357m (pre AASB16 basis) which is ahead of consensus at $347m. FY23 total revenue is expected to be $1.64bn, up 9.7% on last year. The full year results will be announced at the end of September.

Investment View

A demerger of Peter Alexander and Smiggle into two separate entities is a realistic outcome of the review but is not guaranteed. Details of the review will be crucial to understanding how PMV intends to take these businesses forward. It seems the current structure is not fully delivering on the Board’s expectations.

Solomon Lew, as the major shareholder (40%), will clearly have a strong say in the new direction for PMV.

In its current form, we see room for further capital management plus network expansion.

We retain our Buy recommendation.

Figure 1: Peter Alexander

Figure 2: Smiggle

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Stock Overview

Share Price

Company Overview

Premier Investments is a retail group that have brands like Smiggle, Peter Alexander, Just Jeans, Jay Jays, Portmans, Dotti, and Jacqui-E.

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