Premier Retail reported 1H25 sales down 1% and EBIT fell 20%, including the impact of the Peter Alexander’s UK expansion. We forecast sales growth of 4.5% in 2H25e with a smaller gross margin decline. Cost growth will continue, leading to EBIT margins dropping by 778bp to 21.9% for FY25e. Premier Investments will continue to focus on improving Smiggle’s performance which is showing early signs of improvement.

Premier Investments’ trading update highlights negative operating leverage to soft sales trends.  Premier Retail expects sales to fall 2% with EBIT down 21% at the mid-point of guidance.  The surprise in this result is the inability to cut costs given weak sales. Perhaps there are fewer variable costs that can be cut without damaging sales.