This was published 4 years ago
'Hardest decision': Premier shuts 900 stores, refuses to pay rents
By Dominic Powell and Carolyn Cummins
Retailing powerhouse Premier Investments has become the latest major retailer to shut stores and stand down staff, with the Smiggle and Just Jeans owner also telling landlords it would not pay rents during the shutdown.
The ASX-listed group, which is 42 per cent owned and chaired by retail veteran Solomon Lew, told investors on Thursday it had "no choice" but to temporarily close all of its retail stores until April 22, standing down over 9000 staff worldwide, bar a small number of the company's 500 head office staff.
Premier, which owns Just Jeans, Portmans, Smiggle and Jay Jays, will close its stores and stand down 9000 staff globally.Credit: SMH/The Age
The company will also stand down its entire executive team, which will work from home during the period for either no pay or reduced leave entitlements. Premier's brands include Smiggle, Peter Alexander, Jay Jays, Just Jeans and Portmans.
Continuing the company's hardline stance against landlords, Premier said it also intended to pay no rent across any of its stores during the period. Seventy per cent of its store leases either expire this year or are in holdover, providing the company with "extraordinary" flexibility.
At the company's half-year result last week, chief executive Mark McInnes foreshadowed the company's decision to play hardball with landlords, saying they had "a role to play in ensuring retailers survive [this pandemic]".
In response, Scentre Group chief executive Peter Allen said he was "surprised" to see Premier announce a shutdown, saying it was "premature" while the government was still working through options for workers. Scentre holds 219 Premier stores in its portfolio.
"There is a legal obligation to pay rent even if the stores close and that legal obligation means we must engage in commercial discussions with our tenants," Mr Allen said.
On Thursday, Mr McInnes said shutting stores was the "hardest decision" the company had ever had to make but noted it was "necessary" to preserve the business throughout the crisis. The company operates around 900 stores in Australia and is one of the country's largest retail tenants.
Citi analyst Bryan Raymond said the company's decision to take pre-emptive action against the virus was wise, noting it would reduce cash burn and provide the company with "enough headroom to withstand weaker trading conditions in the coming months" given its strong balance sheet.
Premier had $200 million of cash on hand and debts of $101 million at the end of the half. The company's shares rose 1.5 per cent to $10.42 on Thursday.
"Premier remains one of our top picks," Mr Raymond said. "While significant disruption is anticipated near term, we believe Premier is well placed given its net cash balance sheet, rental optionality and strong online presence."
Factoring in a predicted month of store closures, Citi expects non-food retailers forced to shut doors will experience a decline of 10 to 20 per cent in comparable sales for the half, while earnings will be shaved by 11 to 19 per cent.
A huge number of other Australian retailers also made the difficult decision to close stores on Thursday, as pressures from the coronavirus continued to mount.
Accessories retailer Lovisa will close almost all of its 400 stores across the globe, with Singapore the only market continuing to trade, and stand down its entire retail workforce. Accent Group, whose brands including Athlete's Foot and Platypus, will also shut its stores and stand down 5000 employees for four weeks.
RAG Group, which owns brands such as Tarocash, YD and Connor, will also close over 500 stores from 5pm on Friday, standing down 3000 employees. General Pants stores will also shut across the country, as will all 150 stores owned by retailing group Factory X.
Earlier this week, Michael Hill Jewellers announced it would shut its 300 stores across the globe, including 165 Australian locations and, on Wednesday, Mosaic Brands shuttered nearly 1400 shops in Australia, standing down 6800 employees.
Well over 30,000 employees have already been affected by the retail shutdowns, with more closures expected by the end of the week.
A number of listed retailers also pulled the pin or deferred paying their dividends, with Lovisa postponing its 15¢ a share dividend until September and Super Retail Group ditching its 21.5¢ dividend altogether.