The majority of discretionary retail stocks have been trading on or around all-time highs, led by the likes of Harvey Norman (HVN), JB Hi Fi (JBH), Lovisa (LOV) and Nick Scali (NCK), but the sector is certainly not performing as one. Soloman Lew’s retail holdings in Myer (MYR) and Premier Investments (PMV) have been obvious underperformers, not new for the former, however the latter has certainly been experiencing a tougher time than usual.
- Last week, both stocks reported FY25 results, and both were on the soft side. We’ll put MYR in the too hard basket for now, and concentrate on PMV, following it’s ~30% slide in share price.
Premier’s FY25 result came in a touch soft, with earnings slightly below market expectations. Sales were up +1.5% on the prior year, but earnings (EBIT) fell -18% and profits (NPAT) was down -22.5% as margins compressed and losses from the UK expansion weighed.
As a refresher, PMV owns various retail brands, including Peter Alexander (Pyjamas), Smiggle (stationery, bags & accessories for kids/teens), Just Jeans, Jay Jays, Portmans, Dotti & Jacqui E, along with a 26% shareholding in Breville. This has traditionally been one of the “go too” retail stocks on the ASX, but it’s clearly lost its premier status.
Two of their most important brands are Peter Alexander (PA) and Smiggle. PA continues to deliver (+8.7% sales, +9.2% in early FY26 trading), underpinned by store rollouts and bigger-format sites. Smiggle, however, remains challenged, hurt by cost-of-living pressures on young families and patchy execution. In a nutshell, it’s expensive, and kids/parents don’t have the money to buy nice to have stationary! Currently, PMV is searching for a new CEO to refocus the brand, but recovery will take time. Margins were squeezed further by higher rents, wages, and clearance activity, alongside the start-up drag from PA in the UK, which has not enjoyed the early success that Nick Scali has in this market.
Looking forward, management is guiding to a margin recovery as Smiggle stabilises, PA UK losses narrow, and PA momentum continues, but it’s just not cheap enough for the position it finds itself in, trading on the 17.4x FY26 consensus earnings. While we think their holding in Breville (BRG) is underappreciated and Soloman Lew has proven to be a great operator over a long period of time, we think there are too many challenges in the near term.
- Momentum in the share price remains poor, and while we think further weakness presents could present an opportunity longer term, for now it seems all too hard. We’ll look to revisit on signs of stabilisation in Smiggle or stronger execution in the UK.
MM is neutral on PMV ~$19
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