Solomon Lew sacks Smiggle boss, citing misconduct as Premier Investments warns on slowing sales
Billionaire Solomon Lew’s retail conglomerate Premier Investments has sacked its longtime boss of its kids stationery brand Smiggle, citing misconduct, as the group also reports slowing sales and earnings.
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Billionaire Solomon Lew has sacked the long-serving and highly successful boss of his children’s stationery retailer Smiggle, John Cheston, over a “serious misconduct” allegation, just months after the executive announced he would be jumping ship to work for rival billionaire retailer Brett Blundy.
Mr Cheston has hired high-profile workplace and defamation lawyer Rebekah Giles to protect his interests.
Mr Cheston will now have time on his hands before he joins Mr Blundy’s ASX-listed jewellery retailer Lovisa next June as its new chief executive – one of the highest paid on the public market with a fixed remuneration of $2,35m a year along with almost $10m in short-term and long-term bonuses from 2025 to 2027.
The surprise sacking of Mr Cheston after more than a decade running Smiggle, which is owned by Mr Lew’s Premier Investments, came after The Australian revealed leaked documents on Monday that showed Premier Investments’s apparel brands had booked worsening sales and earnings in the second half due to tougher trading conditions.
Premier Investments confirmed the bad news when the market opened, which sent Premier Investments shares down as much as 6 per cent before closing down $1.36, or 3.86 per cent, at $33.85.
Stationery juggernaut Smiggle has become a global retailer after expanding into Britain, the Middle East and Southeast Asia. Smiggle is the high-growth retail platform for Just Group, the fashion and apparel division of Premier Investments that also owns Peter Alexander, Portmans, Dotti, Jay Jays, Jacquie E and Just Jeans.
“The Just Group board considers that Mr John Cheston has engaged in serious misconduct and a serious breach of his employment terms, and on that basis his employment has been terminated today,” Premier Investments said in a brief public statement on Monday, without offering any further explanation.
Within hours, Mr Cheston strongly denied any misconduct.
“John Cheston resigned from his employment with the Just Group on 3 June providing 12 months’ notice before he would commence his employment as the Chief Executive Officer of Lovisa Holdings. The allegations of misconduct are categorically denied by Mr Cheston,” the statement said.
Mr Cheston’s lawyer, Rebekah Giles of firm Giles/George, has a strong reputation among corporate executives, politicians, media personalities and celebrities for taking on high-profile cases in recent years and is seen as the “go to” lawyer for guarding their reputations, rights and livelihoods. Her clients have included former federal Liberal staffer Brittany Higgins, businessman Mitchell Hooke (in a case against his former son-in-law and ex-South Sydney rugby league captain Sam Burgess) and former attorney-general Christian Porter.
At this stage it is believed there are no wrongful dismissal cases on foot against Premier Investments on behalf of Mr Cheston.
It would not be the first time Mr Cheston had tackled his former employer. In 2011 he sued fashion chain Country Road after it sacked him only three months after hiring him to run the business, citing “irreconcilable differences with the board over the future direction of the company”.
That case was later settled, with $1.1m paid to Mr Cheston. In an interesting coincidence, at the time Country Road’s largest shareholder after South Africa’s Woolworths Holdings was Solomon Lew.
The publicly listed Lovisa is controlled by another billionaire, Mr Blundy, who earlier this year hired former Premier Investments boss and veteran Lew executive Mark McInnes to help run his private BBRC investment vehicle. Within a few months of that appointment, Mr Cheston was poached from Mr Lew’s Smiggle empire to join Lovisa, but stayed on at Premier Investments to serve out his notice period.
Mr Blundy and Mr McInnes will be hoping the success Mr Cheston brought to Smiggle will now rub off on Lovisa.
Meanwhile, Premier Investments issued a trading update for its Premier Retail business, the division which owns Smiggle, Peter Alexander and five apparel brands, revealing earnings guidance for 2024 slightly below market consensus.
The trading update came after The Australian on Monday revealed deteriorating sales for its five key apparel brands – Portmans, Just Jeans, Dotti, Jay Jays and Jacqui E – through the second half, with some brands slumping as much as 10 per cent.
The leaked internal Premier Investments documents showed that many of these fashion and apparel brands, which could be sold to Myer if a deal is agreed to, were millions of dollars behind budget.
On Monday, Premier Investments’ trading update tipped global sales for its Premier Retail division of $1.6bn for 2024, down from $1.64bn in 2023.
The company, which also holds sizeable equity stakes in kitchen appliances maker Breville and Myer, said it expected post leasing expenses earnings before interest and tax of $341m and earnings of $326m, pre- AASB16 leasing obligations.
Market consensus was for post AASB16 earnings of $342m, putting it slightly below analyst forecasts.
However, what wasn’t revealed in the trading update was the earnings split between the brands that make up the Premier Retail division, and whether poorer sales and profitability for the apparel brands such as Just Jeans and Portmans was made up for by a better performance from its high-growth brands Smiggle and Peter Alexander.
On Monday, The Australian reported leaked budgeting and sales documents flowing from the due diligence process now under way between Myer and Premier Investments showed all of the apparel brands within Premier – Portmans, Just Jeans, Dotti, Jay Jays and Jacqui E – are suffering from negative sales growth and collectively are millions of dollars behind budgeted or projected earnings targets.
According to the leaked financial documents, Portmans recorded a 10 per cent fall in sales for the winter half to $68m to push it well behind its budget target of just over $75m in sales. Just Jeans (the largest of the five apparel brands) booked a 0.4 per cent sales fall to $136.3m, Jacquie E had a sales drop of 8.3 per cent to $33.4m to place it well behind its budget, while sales at Jay Jays for much of the first 24 weeks of calendar 2024 were down 4.8 per cent to $69.2m or 4.7 per cent behind budget.
The leaked documents also reveal at one stage in the second half Portmans was as much as $5.7m behind budget, or nearly 15 per cent, and Jacquie E just under $2m behind gross profit budget, or 10 per cent. In total, at one point of trading through the winter half, the apparel brands in total were $8.9m behind budget for gross profit.
Collectively these apparel brands are tens of millions of dollars under budget for the June half.
Shares in Premier Investments initially fell 6 per cent on the trading update, with analysts now concerned about sliding earnings for parts of the Premier Investments’s retail operations.
E&P analyst Phillip Kimber said the update implied earnings had declined by 13 per cent in the second half against 3 per cent in the first half.
“It highlights trading conditions across the second half were tough (consistent with most other discretionary retailers that have recently reported). Trading has typically improved in June/July.
“Despite tough trading conditions across fiscal 2024, we believe that Premier Investments is one of the better-positioned Australian discretionary retailers.”
Originally published as Solomon Lew sacks Smiggle boss, citing misconduct as Premier Investments warns on slowing sales
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