Solomon Lew’s Premier Investments says high rents could close 350 stores

The owner of some of Australia’s most recognisable brands warns high rents in shopping centres could cause up to 350 store closures, saying landlords “will be responsible for job losses”

Premier Investments has already started to carry through on its threat to close potentially hundreds of stores across Australia and New Zealand if landlords don’t give enough COVID-19 rent relief, warning their shopping centre “is worth less” without its iconic brands.

Despite posting a 29 per cent surge in net profit to $137.8 million for 2019-20 financial year, the company, which owns brands including Peter Alexander, Smiggle, Just Jeans, Portmans and Jay Jays, says it will close up to 350 stores if landlords are inflexible.

As noted by many retailers, there had been a massive shift to online shopping due to coronavirus restrictions, Premier Retail chief executive Mark McInnes said.

“The swing away from shopping in store has sharpened our focus on shop profitability,” he told reporters.

“We have closed 137 stores in the past seven years, demonstrating our willingness to walk away from stores with unrealistic rents.

“While it is not Premier Retail’s objective to close any stores, should landlords not accept this major shift in consumer preference and shopping behaviour, and adjust their rents accordingly, more stores will close.

“If we can’t reach commercial terms on a suitable rental agreement ... we can just leave.”

Smiggle stores are closing in the UK and Hong Kong. Picture: Daniel Munoz/AAP

The company’s underlying EBIT result includes an $8.7 million expense “to strip out our stores and leave” but it has not counted for any redundancies, with Mr McInnes saying the aim would be to redeploy staff to other outlets “where landlords understand what’s going on”.

“If landlords don’t do that, they will be responsible for job losses and it will be them who have made that decision.”

Premier, which also has a stake in Breville worth $1 billion, says 70 per cent of its stores in Australia and New Zealand are currently either in holdover of with leases soon to expire, giving the company maximum flexibility to review performance.

Three stores at Market City in Sydney closed this week.

“Sydney city has been decimated by COVID-19 - our sales in the stores we had in that centre were down 70 per cent and the landlord wanted to charge us our rent and not give us COVID-19 relief, so we left,” Mr McInnes said.

“Pleasingly, there’s a lot of landlords who respect and value the brands ... and there are some landlords who don’t get it.”

Mr McInnes would not estimate how many jobs could be lost, only saying: “I hope none”.

“I hope that the landlords are all sensible enough to reason, to understand that without Premier Investments brands in their centres, their centres are worth less.”

Premier Investments chairman Solomon Lew says the company’s strong 2019-20 result is no accident but reflected 10 years of strategic decisions. Picture: Stuart McEvoy

Breaking down the financial result, Premier said record Peter Alexander sales, up 16.3 per cent to $288.2 million, were able to offset weaker trading in other areas of the company.

Smiggle was hit hard by school closures, but online sales boomed and the brand was once again flourishing as schools and stores reopened.

Premier is, however, closing its remaining four Smiggle businesses in Hong Kong and walking away from 55 out of 131 Smiggle stores in the UK this financial year.

Overall online sales also broke records, up almost 49 per cent compared to the previous fiscal year.

Premier chairman Solomon Lew said the result was “not a product of luck” but a reflection of a decade of strategic, targeted investments.

It was not due to the non-payment of JobSeeker or rent, the billionaire added.

Asked about Victoria’s second wave lockdown, Mr Lew fired a shot at Premier Daniel Andrews, saying he needed to do something significant to help the state economy recover.

“He has a responsibility to the Victorians. What’s transpired here, he needs to make good.”