Premier Investments Ltd (ASX: PMV) announced its first-half results last week, and analysts subsequently took the opportunity to run the ruler over them.
Two of the three brokers we surveyed subsequently reduced their price targets for the company’s shares, although all three still have a bullish outlook. More on that later.
Firstly, let’s have a look at what was announced.
Profit under pressure
Premier last week announced that first-half revenue came in at $460.3 million, down 1.1%, while net profit was 13.1% lower at $101.7 million.
The company’s wholly-owned brands, Peter Alexander and Smiggle, contributed $119.3 million in EBIT.
Premier also announced the appointment of Georgia Chewing as Managing Director of Smiggle, “following a comprehensive strategic review aimed at delivering sustainable global growth for the brand”.
The company said further:
The Board has reaffirmed a Premier Retail organisational structure aimed at providing clear accountability and oversight to support the current two brand structure. Judy Coomber (Managing Director – Peter Alexander) and Georgia Chewing (Managing Director – Smiggle) are outstanding retailers tasked by the Board to achieve significant growth targets set by the Board for both brands. Following a period of significant transformation, John Bryce will return to his core responsibilities as Premier Retail CFO with a relentless focus on cost controls and oversight and accountability for the proven ‘best in class’ logistics and services, supporting the two growth brands.
Premier Investments chair Solomon Lew said the past two and a half years had been a period of significant change for the business, and it was now set up for profitable growth.
He added:
Today, we have a leaner business. The Premier Investments Board is keen to see our brands operate with the speed and agility required to keep pace with consumer trends and spending volatility. The Board now looks toward the optimal organisational structure that supports the current 2-brand business of Premier Retail.
Shares looking cheap
Morgan Stanley’s analyst team had a look at the results and lowered its 12-month price target on Premier Investments shares from $19.20 to $16.90, compared with $12.58 currently.
They said the first-half result was in line with guidance, with slight weakness in Peter Alexander sales “against high expectations”.
They added that the appointment of a Smiggle boss “adds greater certainty around the scope and timing of the strategic reset”.
The analysts at Jarden also reduced their price target on Premier Investments shares, from $16.90 to $15.50.
They said they believed Premier could stabilise the Smiggle business now that a leader was in place.
The Jarden team said that while headwinds were building for the business overall, in terms of rate hikes and petrol pricing, they had raised their earnings forecasts for the company due to “high management alignment”.
RBC Capital Markets, in a quick take published on the day the results were announced, said it had a price target of $13.90 on Premier Investments shares. Â
Premier was valued at $2.05 billion at the close of trade on Thursday.
The post 3 brokers weigh in on how high Premier Investments shares could go appeared first on The Motley Fool Australia.
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Motley Fool contributor Cameron England has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Premier Investments. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.