Premier Investments feels the pinch of weak retail

Premier Investments feels the pinch of weak retail

Premier Investments has been one of the bright lights in the retailing sector with two of its brands, Smiggle and Peter Alexander, growing well above the industry average. However, its full year results, released yesterday, show that even PMV is feeling the pinch of a weak retail industry.

While Smiggle and Peter Alexander sales were up 28.8% and 14.0% respectively, and Just Jeans grew 1.5%, all of its other brands experienced declining sales relative to the prior financial year including Jay Jays, Dotti, JacquiE and Portmans. The sales declines come despite Australia’s retail sales data being relatively strong over the past six months.

Australian consumers appear to be shifting away from traditional Australian brands and towards newer, international brands making it very difficult for some of these retailers. The imminent arrival of Amazon also has the sector very worried as Amazon is being blamed for putting several US retailers out of business, most recently Toys R Us.

Solomon Lew, Chairman of PMV, has spoken about the 11% stake PMV bought in Myer (MYR) last March. Since then, MYR shares have fallen by 37% and reduced the book value of the holding by approximately $34m. While the MYR holding is considered strategic, Lew claims that he just wants a seat at the table rather than intending to make a takeover offer for the company but his comments suggest he isn’t happy with the way MYR is currently run. MYR has been running almost perpetual sales trying to clear stock that in some cases is several years old. In any case, we expect Lew to make some kind of move with respect to MYR in the near future.   

PMV stock closed down 2.5% yesterday as the market clearly wasn’t impressed with the company’s results. The disappointment most likely came from the larger than expected declines in the weak performing brands rather than any problems with Smiggle or Peter Alexander. PMV is aggressively opening new stores for both of these brands such that Smiggle is growing to become the biggest brand for the company, taking that position from Just Jeans.

Rivkin doesn’t hold PMV stock in any portfolio but we nevertheless like to cover it as an example of a solid performer in an otherwise weak sector. Notwithstanding the market disappointment over the recent results, the performance of Smiggle and Peter Alexander are examples of what it takes to succeed in retail in the current environment.

Ready to chat about your portfolio? Get in touch today via email: william.oloughlin@rivkin.com.au or by phoning +612 8302 3633.

      

comments powered by Disqus

DISCLAIMER: Rivkin aims to provide clear and simple information to those visiting our website. If any part of this disclaimer does not make sense, please phone Rivkin and ask to speak with a member of our Dealing and Relationship Management Team. Rivkin provides general advice, securities and derivatives dealing services and accounting administration services. Rivkin does not provide advice that takes into account your, or anybody else's, investment objectives, financial situation or needs. We strongly suggest that you consult an independent, licenced financial advisor before acting upon any information contained on this website. Investing in and trading securities (such as shares listed on the ASX) and/or derivatives (such as Contracts for Difference or 'CFDs') carry financial risks. CFDs carry with them various additional risks that differ from more simple securities such as fully-paid company shares. Some of these risks include not owning the underlying instrument from which a price is being derived, settling trades 'over the counter' with a financial institution rather than on a stock exchange, and using leverage to gain access to trades that may have a higher face value than your initial deposit. This risk of leverage means that it is possible to lose more than your initial investment. Our aim is to create more life choices for our clients, which means improving the wealth of clients throughout many market cycles by nurturing a relationship spanning many years. If you are not comfortable with your understanding of the risks involved before using a Rivkin product and service, please contact our office to seek further information or a Product Disclosure Statement, or make an appointment to sit with one of our friendly financial experts. It is in our interest for your Rivkin experience to be a rewarding and comfortable one. Rivkin is a trading name of Rivkin Securities ABN 87123290602, which holds Australian Financial Services Licence No. 332 802.