Premier Investments is Bitterly Disappointed as the Stock Falls 3%

This morning Premier Investments Ltd [ASX:PMV] fell almost 3% to $13.35 per share.

What happened to Premier Investments Share Price?

Today PMV released their preliminary results for FY17. Total revenues were up 4% to $1.1 billion. Profits were also slightly higher, climbing 1.2% to $105.1 million. It gives shareholders an earnings per share before forex and non-reoccurring items, of 66.75 cents.

PMV maintained a conservative balance sheet, with a debt-to-equity ratio of 30%. Operating cash flow declined from $103.7 million to $97.8 million for the period. What’s worse, capital expenditures increase from $45 million to $105.6 million.

That gives PMV a back of the envelope free cash flow loss of $7.8 million. The management elected to increase total dividends paid by almost $12 million.

Chairman of the board Solomon Lew, was particularly disappointed in their Myer Holdings Ltd [ASX:MYR] investment. PMV owns an 11% stake in the department store. Lew believes Myer has lost its way. ‘We made the investment and obviously it has turned out the way it has,’ he said.

What now for Premier Investments?

PMV’s subpar results has added to fears over the coming of Amazon.com, Inc. [NASDAQ:AMZN]. However, the retailer might have far bigger problems than Amazon in FY18.

Looking through their balance sheet, I found that accounts receivable and inventory for PMV had picked up, while sales decline. Look at the table below to see what I mean:

 

(In millions) 2015 2016 2017
Revenue of goods sold $948 $1,049 $1,092
growth 10.7% 4.1%
Accounts Receivables $14.34 $16.46 $23.68
growth 14.8% 43.9%
Inventory $111.81 $123.56 $140.76
growth 10.5% 13.9%

Extending their credit for longer than they need to and mounting stock piles of inventory may come back to hurt PMV in the future. If FY18 shows more of the same, then it might be a good idea to stay away from the stock. However, at the moment this is just speculation.

Regards,

Härje Ronngard,

Junior Analyst, Money Morning

PS: If you want to find some of the highest growing stock on the ASX, check out these three small-cap stocks.


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