Premier Investments’ FY26 Turnaround Potential

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This story features PREMIER INVESTMENTS LIMITED, and other companies.
For more info SHARE ANALYSIS: PMV
The company is included in ASX200, ASX300 and ALL-ORDS

Premier Investments’ Peter Alexander Brand is firing domestically and is just getting going in the UK. Smiggle has struggled, but analysts see a turnaround ahead.

-Premier Investments’ FY25 sees Peter Alexander outperform and Smiggle underperform
-Margins reduced due to expansion and start-up costs
-Consumer environment improving for Smiggle
-FY26 turnaround thesis suggests shares are cheaply priced

By Greg Peel

Premier Investments ((PMV)) wholly owns sleepwear retailer Peter Alexander and kids’ school supplies retailer Smiggle, has a 25% stake in home appliances manufacturer Breville Group ((BRG)) and strategic property investments.

The company reported largely in-line FY25 results (July year-end), which showed ongoing strong momentum in Peter Alexander with sales up 7.7%, partially offset by a -10.7% decline in Smiggle sales driven by a high single-digit sales decline and second half store network rationalisation.

Retail earnings were down -18% to $195m, reflecting gross profit margin declines from a tougher consumer trading environment (notably in the second half) and opex deleverage.

Peter Alexander

Peter Alexander Australia & New Zealand was the jewel in the crown in FY25. Sales rose 9% and have risen another 9.2% year to date in FY26, driven, Morgan Stanley notes, by store footprint growth, range expansion and an improving consumer, showing the enduring brand strength in A&NZ.

Six new stores were added in the period while nine others were relocated or expanded. Expansion of the average store size from smaller (100-150sqm) to larger (200sqm-plus) stores is a multi-year growth driver, UBS suggests, supported by focused execution.

Management confirmed at least seven new or upsized stores for the first half FY26, with further opportunity for 15-plus locations.

Peter Alexander UK remains in its early stages, having commenced only ten months ago, showing second half earnings losses of -$5m and annualised sales per store of $1.6m versus $4m in A&NZ. While early metrics are weak, the UK remains a longer-term option, UBS believes, potentially contributing $29–77m in earnings by FY30, assuming successful execution.

Thus far, UK expansion looks to be on track, with no change to medium-term store network growth potential.

Peter Alexander in general appears well poised for the gift-giving season. Citi expects the store rollout in FY26 to be similar to prior years.

This broker is attracted to the upside potential of the UK market, but agrees with management’s prudent approach to first prove the concept works.

Smiggle

Smiggle’s second half sales were down -4.7%, but this was a better-than-expected result considering first half sales were down -14.5%, although H2 was measured against easier comparables.

The trading update was disappointing, with sales down -4% in FY26 to date. Momentum was impacted by a shipping delay, with product since arriving.

Brokers agree Smiggle’s core customers, being young families, have been among the most impacted by cost-of-living pressures.

However, Citi’s recent grocery & liquor survey as well as other indicators (eg consumer sentiment) suggest conditions are improving. Still, Citi thinks the appointment of a new leader of the business is critical to get the most out of the brand.

Investor sentiment is increasingly shifting toward structural concerns, although management maintains the issues are execution-related – understandable, says Ord Minnett, given the brand has lacked a CEO for some 15 months.

Notably, Smiggle’s A&NZ sales grew 2% in FY25, with offshore markets (-19%) driving the weakness.

Analysts agree Smiggle will continue to struggle in FY26 but less so than in FY25. Momentum is considered to be to the upside, but it will be a slow-moving turnaround story.

Macquarie suggests a strong Christmas period trading update will be a key catalyst watchpoint for a return to growth in Smiggle.

Margins

Premier Investments’ gross margins at 65.6% were down -154bps in FY25 (down -250bps in the second half) due to clearance given weaker sales (Smiggle) and mix to lower margin PA UK (45.7%), UBS notes.

Cost of doing business to sales rose due to rising rent (larger PA stores, new leases) and employee expenses (one-off in the first half, minimum wage increase), start-up PA UK losses (-$10.9m FY25) and soft sales in Smiggle.

UBS forecasts earnings margin expansion as the Smiggle product and external environment improve which support sales growth, Peter Alexander UK losses reduce and Peter Alexander sales growth generally continues.

Citi believes gross margins should improve in FY26 considering a better consumer environment lessens the chance of inventory markdowns as occurred in the second half FY25.

Moreover, the strengthening currency is favourable and there is upside from renegotiation of supplier terms given reduced demand from the US in light of tariffs.

On costs, the exit of unprofitable Smiggle stores should be favourable. However, with costs largely fixed in this brand, Citi needs to see positive sales to offset underlying wage inflation.

Value Opportunity

Macquarie sees valuation opportunity in the event of a turnaround, with Premier Investments Retail trading at an implied enterprise value to earnings multiple of 11.8x despite an outperforming Peter Alexander A&NZ business, potential for offshore rollout success (in both Peter Alexander and Smiggle), and net cash balance sheet deployment. The company was $333m net cash positive at end-FY25.

Macquarie maintains a Neutral rating, but cites improving risk/reward symmetry and an upside-catalyst rich FY26, macro tailwinds to Australian consumption balanced and growth in Peter Alexander offset by headwinds to Smiggle from trading weakness.

Premier Investments will benefit from an improved consumer environment, Citi agrees, and there is some valuation upside. However, with question marks remaining on Smiggle, Citi retains its Neutral rating.

Ord Minnett (Buy) notes Premier Investments trades at a circa -30% PE discount to the average ASX retailer (circa 19x). At current levels, the market is seen attributing minimal value to Smiggle.

Morgan Stanley applies a 12x multiple for Smiggle and a 23x multiple for Peter Alexander. This broker maintains an Overweight rating given: i) ample growth runway in Peter Alexander from store size expansion, network growth, and international optionality, ii) a turnaround opportunity in Smiggle, and iii) attractive valuation for the retail business at 13x when adjusting for investments and cash reserve.

UBS retains Buy due to the strong core A&NZ Peter Alexander business, and also the extent Breville Group is underappreciated within Premier Investments’ valuation. This combination makes the risk/reward attractive in UBS’ view, despite a more challenged Smiggle and start-up losses in Peter Alexander UK.

Bell Potter views the stock as trading at a discount to its sector coverage, considering the Premier Retail division with two global roll-out worthy brands offering  some 7% EBIT growth in FY26 and a PE of 12x excluding equity investments, land bank and cash, while retaining a strong balance sheet supportive of M&A as attractive. Bell Potter maintains Buy.

The six brokers monitored daily by FNArena covering Premier Investments have four Buy or equivalent and two Hold ratings between them. The average target has fallen to $24.12 post the FY25 result from $25.23 prior, on a spread from $20.80 (Macquarie) to $26.50 (Bell Potter).

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