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  • Writer's pictureMarcus Bogdan

Initiating Premier Investments (PMV)

Updated: Aug 10, 2023

Blended Australian Equities Portfolio

We have recently initiated a position in Premier Investments (PMV), topped up our existing positions in NAB, and trimmed our positions in News Corp (NWS) in the Blended Australian Equities Portfolio.

Premier Investments (PMV) wholly owns the retail conglomerate the Just Group representing 7 established brands, namely: Just Jeans, Peter Alexander, Smiggle, Portmans, dotti, Jacqui E & Jay Jays. Premier Investments also holds a 28% interest in electrical consumer products manufacturer Breville Group. PMV’s retail footprint includes ~1,100 stores across 6 countries and an online presence in 4 countries (representing ~19% of 1H23 total sales).

We have initiated a position in Premier Investments following a ~19% fall in its share price over the last 6 months. Consumer discretionary retail stocks have been weighed down by more challenging retail conditions with sales momentum slowing as cost- of- living pressures impact the consumer. Retailers are also facing the pressure of higher cost pressures driven by higher wage rates (post Fair Work Commission decision to raise retail wages +5.75%). Offsetting this has been a notable improvement in supply chain availability and freight costs.

We do expect that retail earnings results for the upcoming reporting season will reflect the tougher retail conditions experienced in the June quarter, however anticipation of weaker trading results has been well flagged by recent retail company updates and general share price underperformance. For PMV, greater discipline on inventory levels and working capital should provide an improvement in cash flow generation. Indeed, at PMV’s 1H23 result, the company highlighted a clean inventory position to commence in 2H23, with 1H23 sales growing faster than inventory investment.

Overall, PMV has a long history of disciplined capital management and Founder led (Lew Family) retail acumen. PMV offers an attractive dividend yield +5%, a net cash balance sheet (~$400m net cash 1H23) and surplus franking credits ~$327m.

We have taken advantage of strong share price performances in James Hardie (JHX) +30% and News Corp +14% over the quarter to lock in profits.

We have added to our position in National Australia Bank (NAB) following an extended period of underperformance (-~7% versus the ASX 200 +7% YoY). Recent industry commentary suggests that mortgage competition has eased as all banks have recently lifted front-book mortgage prices, and importantly credit quality has remained resilient despite tightening credit standards.


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