- Premier Investments result met expectations
- Guidance maintained for FY12
- Weakening retail environment sees cuts to earnings forecasts
- Two broker ratings downgraded post result

By Chris Shaw

Retail group Premier Investments ((PMV)) reported an adjusted net profit after tax of $51.5 million, a result down 20% relative to the previous corresponding period. The result contained few surprises as management had guided in earnings in July.

In assessing the result, Macquarie notes Premier's largest brand Jay Jays delivered disappointing performance in the period. As an offset, the smaller but current drivers of top line growth, Smiggle and Peter Alexander, performed strongly. Macquarie also notes an update on a strategic review shows most initiatives are currently on track or a little ahead of schedule.

Credit Suisse picked up on the fact underlying fixed cost growth per store of 4% and weak sales were unable to be offset by cost reductions, meaning operating leverage for the period was negative. Additional marking down of inventory was needed and this also impacted on earnings, but on the positive side the move leaves Premier with a clean inventory position for the first half of FY12.

With the result, management at Premier indicated that while earnings guidance for FY12 is unchanged, trading for the first six weeks of 2012 has been weaker than expected. As Deutsche notes, this reflects a further deterioration in both the macro environment and consumer confidence.