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Highlights
- Premier Investments shares fall 2.2% to AU$27.04, marking their lowest level since January 19, 2024.
- Citi and Morgan Stanley cut price targets, citing higher costs, weaker margins, and underperformance of the Smiggle brand.
- Premier forecasts global sales for H1 FY25 at AU$855–AU$865 million, down from AU$879.5 million in the previous comparable period (pcp).
Shares of Premier Investments (ASX:PMV) extended their decline on Tuesday, dropping 2.2% to AU$27.04 by 2332 GMT. This marks the stock's lowest point since January 19, 2024, as market sentiment turned negative following the company’s half-year trading update, which revealed challenges in managing rising costs and softening sales.
Australian retailer Premier Investments, which operates brands such as Peter Alexander and Smiggle, announced that its global retail sales for the first half of FY25 are expected to range between AU$855 million and AU$865 million. This represents a decline from the AU$879.5 million achieved in the same period last year.
Citi attributed the weaker performance to higher-than-anticipated costs of doing business, which weighed heavily on profitability. The brokerage downgraded its price target for Premier from AU$36 to AU$30 while maintaining a "neutral" rating. “The business has been adept at managing cost inflation in the past, but perhaps we’ve grown too comfortable with that,” Citi analysts commented.
The Smiggle stationery brand was identified as the primary driver of the retail segment's underperformance. Citi expects this trend to persist, as demand for the brand continues to struggle against rising competition and a challenging consumer environment.
Morgan Stanley echoed these concerns, highlighting the likelihood of earnings downgrades driven by lower gross margins aimed at stimulating demand and a lack of growth in Smiggle. The brokerage reduced its price target to AU$37.50 from AU$39.50 but retained an "overweight" rating, citing Premier’s strong brand portfolio and potential for a rebound in the longer term.
Premier’s stock has faced significant pressure in 2025, with shares down approximately 13.5% year-to-date, including the latest session’s losses. Analysts note that while the company has historically navigated inflationary pressures effectively, the recent update underscores the challenges of sustaining growth in a highly competitive retail landscape.
Investors will be closely monitoring Premier Investments’ full H1 FY25 results and management’s strategy for addressing these challenges, particularly in revitalizing Smiggle and managing operating costs.
