Brokers remain upbeat on
-FY22 results for
-Brokers show caution around the macroeconomic outlook
-Results for Smiggle and Peter Alexander surprise positively
-Rental negotiations lend earnings margin support
-A positive outlook for Peter Alexander
FY22 results for
Sales, earnings and profit for FY22 rose by 5%, 3% and 5%, respectively, versus the previous corresponding period.
The retailer finished the financial year with
While five of the six brokers in the FNArena database make material adjustments to individual 12-month target prices, the average target price remains largely unchanged at
Providing an insight into this tepid response by brokers, Macquarie cites the uncertain macroeconomic backdrop and looming gross margin headwinds from adverse currency movements, along with lower scope for consumer promotions.
Despite this view, the broker remains upbeat, as indicated by its Outperform rating, highlighting 50bps of gross margin expansion for FY22 along with sales growth across all brands, apart from Just Jeans and Jay Jays.
Morgan Stanley, while positive on the currently resilient consumer and solid management execution, agrees with Macquarie on the challenging macro-outlook, and retains an Equal-weight rating.
Premier operates an array of Australian retail apparel brands which also includes
According to Morningstar, Smiggle has an affordable price point and limited direct competitors in its geographic markets, which include A&NZ and the
Smiggle results were a highlight for
This broker points out consumer perception of the Peter Alexander brand has been upgraded in recent years, and a category expansion into accessories, kids and plus size has driven sales higher.
Citi raises its earnings forecasts to reflect a positive surprise from Peter Alexander sales, and its contribution to the gross margin uplift, though lowers its rating to Neutral from Buy following a 15% share price rally on the day results were released.
Margins were also supported by the company's upper hand in rental negotiations, according to Citi.
Expansion of Peter Alexander and Smiggle is likely to drive structural growth in FY24 and FY25, according to Credit Suisse, while the balance sheet provides scope for opportunistic acquisitions.
More detail on margins
Credit Suisse points out Premier's gross margins have risen to 64.8% in FY22 from 61.9% in FY19, due to a relatively low promotional environment.
Now, currency movements and high promotional intensity are driving a step-down in
However, this broker expects earnings (EBIT) margins will remain well above pre-covid levels as online penetration drives a favourable mix shift, particularly around rent costs.
Despite the inflationary environment, the strong hand in rental negotiations is contributing around 400bps of earnings margin uplift on an ongoing basis, according to Citi.
Rising labour costs were well managed in the second half of FY22 as stores reopened, and
A positive outlook for Peter Alexander
According to Credit Suisse, the major company-specific determinants of growth over the medium term are the expanded children's and plus-size ranges for Peter Alexander, along with the development of larger format stores.
The broker believes this space expansion could be a low-to mid-single-digit tailwind for Peter Alexander over the medium term and suggests
Given the strength of the Peter Alexander brand domestically and strong offshore customer purchases via the online channel,
There are three Buy (or equivalent) broker ratings in the FNArena database and three Hold ratings.
Shaw's rating is Buy with a price target of
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