What Happened to the Premier Investments Share Price?
Specialty retailer Premier Investments Ltd [ASX:PMV] closed Wednesday higher by 2.79%. The company owns several fashion specialty brands including Just Jeans, Portmans, Peter Alexander and Smiggle, in various locations throughout Australia and New Zealand, Singapore and the UK. PMV also operates a joint venture in South Africa.
Why Did This Happen to the Premier Investments Share Price?
Two key factors are driving the price increase. On June 13, Commonwealth Bank revised its price target for PMV to $9.60, up 14.28%. CBA believes the stock is undervalued at its current price of $8.47.
In addition, Premier Investments is likely to be trading on news that Chairman Solomon Lew has recently acquired almost a 10% stake in David Jones through his privately owned investment company, Australian Retail Investments. Speculation is rife that Lew will use his stake in David Jones to upset the Woolworths Holdings [JSE:WHL] takeover of David Jones, as reported in The Australian.
What Now For Premier Investments?
PMV is pursuing international expansion of two brands, Peter Alexander and Smiggle. The February launch of Smiggle in the UK has been successful, and management believes the UK market has the capacity for an additional 200 stores, potentially creating an extra $200 million over five years.
A lower consumer sentiment reading of 92.9 appeared to drive Premier Investments to its current trading levels. However, an increase in June consumer sentiment should see the stock trade higher from here. Support appears to be forming around $8.20.
However, unseasonably mild conditions for Autumn have made shifting winter stock difficult, and this could be reflected in full year 2014 financials due out in August.
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The general consensus from CBA analysts is that Premier Investments will outperform the market. The analysts also anticipate that PMV will raise the full year dividend to 40 cents this financial year, up from last year’s 38 cents, a 6.32% increase.
Shae Smith+
Editor, Money Morning
