13-Aug-2020: Premier Retail 2H20 Trading Update
Following Premier Retail’s record 1H20 result, Premier Retail today provides an update on trading for 2H20 (26 weeks ended 25 July 2020).
As a direct result of the impacts of COVID-19, Premier Retail global sales for 2H20 were $484.2 million, down $106.5 million or 18.0% on 2H19. Despite the headline drop in sales and related decline in gross profit, Premier Retail’s online sales and EBIT growth have continued to accelerate to deliver record earnings.
Premier Retail’s online sales of $123.3 million for 2H20 were up $50.8 million or 70% on 2H19 and contributed 25.5% of Premier Retail’s total 2H20 sales (2H19: 12.3%). Premier Retail’s online sales deliver significantly higher EBIT margin than the EBIT margin of the retail store network. Full year FY20 online sales were $220.4 million, up 48.8% on FY19 and contributed 18.1% of Premier Retail’s total FY20 sales (FY19: 11.7%).
Premier Retail now expects 2H20 EBIT to be between $58.7 million and $59.7 million, up between $5.2 million and $6.2 million or between 9.7% and 11.7% on 2H19, as a combined result of:
- The very difficult decision to shut down its global operations and the significant benefit of the subsequent hard cost out programs;
- The very significant online EBIT growth achieved;
- Strong sales growth and subsequent significant gross margin from wanted product since gradual re-opening globally; and
- Maximising the significant various global government rent and wage subsidy schemes announced only after Premier Retail’s global shut down (26 March 2020).
As a result of the strong second half EBIT, Premier Retail now expects FY20 EBIT to be between $184.8 million and $185.8 million (FY19 underlying EBIT: $167.3 million), up between $17.5 million (10.5%) and $18.5 million (11.0%) on FY19.
Premier Investments Limited has and continues to maintain a strong balance sheet. The above trading update relates to Premier Investments Limited’s wholly owned Premier Retail segment and does not include any results from its investment division.
The sales and EBIT numbers stated in this release are subject to audit, based on a “pre-AASB 16” basis and do not take into account potential asset value impacts resulting from COVID19.
Premier Investments Limited expects to release FY20 results in late September 2020.
--- click on the link above for the full announcement - including an impressive graph of their Online Sales Growth and their Online Sales as a percentage of their Total Sales ---
PMV is 42.43% owned by Century Plaza Investments, which is owned and controlled by billionaire Solomon Lew. PMV also has Perpetual (PPT, with 9.97%) and Airlie Funds Management (owned by Magellan Financial Group, MFG, with 7.8%) on their share register.
The above trading update involves Premier Retail, and it would appear that COVID-19 hasn't really done them much harm at all, if anything it appears to have accelerated their move to online (I think they're probably going to be 100% online eventually, or close to it), and their FY20 before-tax earnings (EBIT) has risen by between 10.5% and 11% (compared to FY19). However, the other side of PMV is the investment side of the business - and I would imagine there are mixed results there. For instance, PMV own 10.77% of Myer (MYR), which has lost two thirds of its market cap since September 5th when they were trading at 63 cps (now 21 cps, down by 66.7%); However PMV also own 33.4% of Breville Group (BRG) and BRG is up +64.3% over the same period ($16.61 on Sep 5, $27.29 on Aug 12). Many may not realise that Breville (BRG) is now a $3.7 BILLION dollar company, whereas Myer (MYR) has a market cap now of only $164M and has become a microcap company. Therefore, the paper losses that Solly (and PMV) has endured with his one tenth of Myer this past year are almost insignificant compared to the huge paper profit that he's made out of owning one third of Breville.
Unfortunately, I don't currently hold PMV - you can't pat all the fluffy dogs - but they're certainly on my Strawman.com scorecard. I have held PMV before, and will do again, I replaced them in my super fund earlier this year with Regis Resources (RRL), and I'm so far up almost +60% on RRL, but when I rotate some money back out of gold producers, PMV is right at the top of my "buy list".
Something else to keep in mind is that Premier (PMV) have a very healthy franking credit balance, courtesy of some good strategic prior acquisitions, so will be able to keep franking their dividends at 100% well into the future despite having increasing earnings generated from outside of Australia - mostly due to their very successful global Smiggle roll-out.
