Premier Investments puts Peter Alexander, Smiggle demerger on hold to focus on Myer merger

Premier Investments’ (ASX: PMV) planned demerger of its stationery business Smiggle and luxury sleepwear chain Peter Alexander have been put on hold for now while the company pursues a potential merger of its Apparel Brands division with Myer Holdings (ASX: MYR).

The retailer and investment group, which had planned an ASX listing for Smiggle in January next year, says the proposed Myer merger announced in June warrants further investigation.

It comes as Premier Investments today revealed a tough year for its retail operations, with the exception of Peter Alexander which posted revenue of $508.6 million, topping the half a billion dollars for the first time, in FY24.

The popular pyjama brand, which benefitted from nine new store openings during the year, represents almost a third of Premier Investments’ group sales in its retail division.

However, despite a lift in margins Premier recorded a 2.7 per cent drop in group revenue to $1.59 billion, leading to a 4.85 per cent fall in full-year profit to $257.92 million.

The result was impacted by a 6.4 per cent decrease in revenue to $790.7 million from the group’s Apparel Brands division, which comprises Just Jeans, Jay Jays, Portmans, Dotti and Jacqui-E, with 719 stores in Australia and New Zealand.

Smiggle, a solid performer most years, also struggled due to a pullback in discretionary spending by consumers. Smiggle posted global sales of $296 million in FY24, down 7.4 per cent on its record FY23 sales performance.

Premier Investments’ chairman Solomon Lew has described FY24 as “another challenging year for discretionary retail”.

However, he notes that the company has delivered a strong earnings result before interest and tax of $325.9 million through “careful management of gross margin and operational costs”.

As for the strategic review of Premier Retail launched in August last year, Lew notes that the past 12 months have highlighted “significant future opportunities for each of Peter Alexander, Smiggle and the Apparel Brands”.

“In June 2024, the Premier board determined that the proposed combination of the Apparel Brands business with Myer warrants further consideration, and work has diligently taken place to analyse this proposal,” he says.

“The board’s focus in assessing the proposal or any strategic review outcome will also be on creating shareholder value, whilst maintaining the potential and integrity of each of the businesses.”

While Myer has yet to attach a price tag to the deal, the plan is likely to see it offer shares to Premier shareholders in exchange for the Apparel Brands portfolio on a proportional basis around maintainable earnings and enterprise values.

Premier Investments today has revealed plans to prioritise exploration of this opportunity and the value it might create for shareholders, ahead of its demerger plans for Peter Alexander and Smiggle.

“The board continues to see merit in the potential demerger of Peter Alexander and Smiggle, however, due to the current prioritisation of the proposal received from Myer, the board is no longer working towards the demerger of Smiggle by the end of January 2025,” the company says.

The latest fall in earnings by Smiggle may also have swayed that decision.

“The ultimate timing of any demerger of Peter Alexander and/or Smiggle will depend on the outcome of the current discussions with Myer,” says Premier Investments.

“Any transaction with Myer and/or any demerger of Peter Alexander and/or Smiggle will be subject to further review and final board approval as well as regulatory and shareholder approval.”

Despite a fall in net profit for FY24, Premier Investments has announced a record final dividend of 70c per share for FY24, up 10c from a year earlier. This takes the full-year payout to $1.33 per share.