Small Caps | 12:13 PM
Shares in Premier Investments rallied after a better-than-expected start to FY27, but a lasting recovery rests on Smiggle winning back customers.
- Premier Investments’ early FY27 trading update well-received
- Smiggle tries to win back 9-12 year old customers
- Cash and investments support potential acquisitions
- Management notes scope for further capital returns
By Mark Woodruff
Retail investment company Premier Investments ((PMV)) had largely pre-guided FY26 results (July year-end) but a better-than-expected start to FY27 sparked a 7% share price rally from a 52-week low on result day (24 September).
Consumer-oriented stocks remain under pressure on the ASX. Absent a reversal in RBA communications, a sustained recovery in the shares likely depends on the troubled Smiggle business successfully winning back customers.
In a positive surprise, sales and gross profit across both Smiggle and Peter Alexander started FY27 broadly flat, with like-for-like sales and gross profit dollars, on a constant currency basis, both within 1% of year-ago levels.
Expectations had previously fallen sharply after management downgraded its FY26 Retail division guidance in August.
Early FY27 trading indicates Premier Retail is tracking broadly in line with, or marginally ahead of, consensus forecasts.
Jarden views the start to FY27 as encouraging as comparables ease, with benefits from Smiggle’s turnaround expected to begin emerging from the second quarter.
Positively, management noted the key gifting and peak trading periods are still ahead.
Premier’s two-pronged business
Premier Investments is divided into two businesses: Premier Retail, which operates Peter Alexander and Smiggle, and an investments arm holding a 25% stake in Breville Group ((BRG)) --valued at $384.2m on July 3-- as well as strategic property assets.
Peter Alexander is Premier Retail’s largest brand, generating $565.3m of sales in FY26.
Founded as a mail-order pyjama business in 1987, the brand now sells sleepwear and related products through more than 130 stores across Australia and New Zealand, as well as online, and is expanding into the United Kingdom, albeit without the costly exercise of opening physical stores.
Smiggle, which accounts for around 30% of Premier Retail, sells children’s stationery, school supplies and lifestyle products across more than 20 countries through stores, online channels and wholesale partners.
Smiggle's FY26 sales fell -12.9% to $230.2m year-on-year.
The Smiggle store network stood at 309 at the end of FY26, down -13% from the start of FY25.
A strategic reset commenced in August, including refreshed product ranges aimed at reclaiming Smiggle’s appeal among six to 12-year-olds.
Noting Peter Alexander --outside of the UK-- continues to demonstrate resilience in a difficult retail environment, Citi forecasts weak sales growth for Smiggle in FY27 and is waiting to see whether the strategic reset can drive a recovery.
Balance sheet and new growth opportunities
Morgan Stanley highlights Premier’s $39.4m cash balance and the board’s view that challenging retail conditions could create acquisition opportunities, a positive following the loss of Peter Alexander’s UK growth option.
The latter comment refers to the decision to close the three UK stores as Peter Alexander's physical-store rollout failed to generate sufficient traction amidst tough conditions. The operation generated only $5.9m in FY26 sales and incurred an operating loss of around -$8m, with a further -$9m in closure costs.
Peter Alexander’s fresh initiatives include a new international wholesale opportunity and Myer ((MYR) concessions from August 2027 across 24 Myer stores.
A concession effectively operates as a ‘store within a store’, with Premier retaining greater control over Peter Alexander’s merchandise, pricing, presentation and potentially staffing, while Myer provides the retail space and customer traffic.
Under such arrangements, Myer would typically receive a fee or percentage of concession sales rather than purchasing Peter Alexander inventory for resale.
The board approved a fully franked ordinary dividend of 36c, taking the full year payout to a fully franked 81c, a rise of 62% on FY25.
The previously announced share buyback continues, with management suggesting scope remains for further capital returns to shareholders.
Smiggle Reset
Announced in the first half of FY26, the Smiggle reset aims to refocus the brand on children aged six to 12, after the brand's customer base shifted towards four to eight-year-olds.
UBS explains the plan includes more innovative products, a selective licensing strategy, expansion into leisure, bath and body products and personalisation, plus improved marketing and visual merchandising.
With implementation continuing over coming months, UBS sees execution as the key risk, given the challenge of rebuilding Smiggle’s appeal among nine to 12-year-olds, expanding into new categories and navigating a difficult discretionary retail environment.
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