The Premier Investments Limited (ASX: PMV) share price is topping the leader board but Goldman Sachs thinks you should dump the stock now.
The PMV share price surged over 15% to $25.90 this morning and is the best performer on the S&P/ASX 200 Index (Index:^AXJO).
The apparel and stationery retailer is miles ahead of the Cimic Group Ltd (ASX: CIM) share price, which is in second spot.
The Oil Search Ltd (ASX: OSH) share price is in third position and both of these jumped by over 5% each.
Source: PMV presentation
PMV share price surges on trading update
The rocketing Premier share price comes on the back of a bullish trading update released this morning.
Management said that total sales jumped 5% in the first 24 weeks of 1H21 ended 9 January 2021 to $716.9 million. Online sales were the standout as that jumped 60% over the same time last year to $146.2 million.
The group expects interim earnings before interest and tax (EBIT) to jump by as much as 85% to between $221 million and $233 million.
Looking fashionable
Like-for-like (LFL) sales was also outstanding. This key retail measure that compares sales of stores opened for at least a year jumped 26.2% in Australia and 18% globally.
The group's online sales commands a significantly higher EBIT margin than the EBIT margin of the retail store network.
Management also highlighted outstanding sales and gross margin growth in Peter Alexander, Just Jeans and Jay Jays in both Australia and New Zealand.
Better than expected but still not enough
The total sales figure exceeded Goldman Sachs' first half forecast of $664 million but that wasn't enough to impress the broker.
"This is a significantly stronger profit than expected, demonstrating a strong sales surge driving expanded gross margin and operating leverage as consumer spending recovered across some apparel categories," said Goldman.
"Operating costs are likely to have benefited from temporary benefits at start of this financial year (e.g. Jobkeeper), but this was expected to be more muted in 1H21 versus 2H20 and likely much less important than the operating leverage impact from strong comparable store sales growth provided in this update."
Is the PMV share price a buy or sell?
Goldman Sachs reiterated its "sell" recommendation on the PMV share price with a 12-month price target of $19.20 a share.
If the broker is right, the Premier share price will need to crash by more than a quarter to reach fair value.
