Premier Investments Limited (PMV) has announced underlying 1H18 NPAT of $78.8m, 6.5% up on pcp. The Just Group EBIT of $102.5m was in line with our $103.4 estimate. The result key highlights are as follows:
- Smiggle continues to grow strongly, shortly to enter Continental Europe: Smiggle continued to achieve strong global LFL sales growth. Including 35 new stores, Smiggle global sales lifted 26.7% to $170.7m (inline vs BPe). In the UK 23 stores were opened with another 7 to 17 openings targeted in 2H18. There were 4 store openings in Australia, 2 & 3 store openings in Malaysia/Hong Kong, and 3 in Ireland. Smiggle is expected to enter the Netherlands in 2QFY19.
- Peter Alexander tracking ahead of 2020 growth plan: Peter Alexander sales increased 15.0% to $114.4m (inline vs BPe) underpinned by strong LFL growth and 11 store openings. New plus-size range achieved significant growth in 1H18 with Bath & Body and extended Childrenswear range expected to launch in April 2018. Peter Alexander is well on track to exceed its $250m sales target by FY20.
- Online sales achieving significant growth, $100m in sales to be reached in 2018: Online sales, which is significantly higher EBIT margin vs group average, increased 71.2% on pcp to $56.0m. Online is now expected to deliver the original CY20 sales target of $100m in CY18, 2 years ahead of schedule. The significant traction in online clearly demonstrates PMV’s leading omni-channel capabilities.
- Strong operating leverage coming through: CODB/sales decreased 144bps, more than offsetting softer gross margins (due to the competitive environment). The opex leverage reflects a more profitable store mix (note Smiggle salary/sales significant lower vs ANZ group average), online growth and centralised functions.
Earnings changes & Investment View: Retain Buy, PT $17.20
There is no material changes to our FY18-FY20 EPS estimates. However time creep & minor model adjustments increases our PT from $16.90 to $17.20. The key takeaway from the result is the continued strong growth across all three key growth pillars, with growth in the online channel particularly strong. At an implied FY18/FY19 EV/EBITDA of ~11.2x/~9.7x for the Just Group, we retain our Buy rating on the stock.
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