Premier Investments and Myer today confirmed the proposal to merge Premier Apparel Brands and Myer. Premier shareholders will receive 7.2 Myer shares at a post synergies 13.0x PE valuation. Premier Investments retains high margin Peter Alexander and Smiggle and an investment in Breville.

Premier Investments reported FY24 Retail EBIT down 9% to $326 million. Gross margins finished higher with a second-half increase of 94bp. Cost management during FY24 helped offset the operational leverage of lower sales. The delayed strategic review allows the board to focus on the Myer merger proposal. 

Lovisa has extended its CEO contract for Victor Herrero to May 2025. John Cheston will be appointed as successor to take Lovisa at the start of FY26e. Mr Cheston comes from Premier Investments as Managing Director of Smiggle, overseeing its expansion into foreign markets over the last decade. With the change to CEO, we lower our Lovisa store rollout forecast in FY25 by 50 stores largely effecting the probability of an accelerated China rollout.

Premier Investments reported 1H24 Retail EBIT down 4.8% to $210 million. Gross margins were higher than expected and along with tight cost control, helped to offset the operational leverage of declining sales. We expect a similar outcome in 2H24e with sales only up 1% and elevated cost growth leading to lower EBIT. Little detail was provided on the strategic review with a potential split up of the business possible in 2025.