Smiggle growth undercut by Brexit

The never-ending Brexit saga is weighing on Solomon Lew’s ­ambitious growth ambitions for stationery powerhouse Smiggle.

Sales for Smiggle hit a record $179 million for the half, but were only up 4.6 per cent compared with double-digit sales growth in the past. Picture: AAP.

The never-ending Brexit saga is weighing on Solomon Lew’s ­ambitious growth ambitions for his stationery powerhouse Smiggle, as political upheaval in Britain has dented the brand’s sales in Europe.

This has prompted the retail magnate to look to markets, from South Korea to the Middle East, to sell Smiggle’s colourful pencil cases, water bottles and backpacks.

Mr Lew’s Premier Investments, a $2.6 billion listed conglomerate that owns fashion brands such as Just Jeans, Portmans and Dotti as well as large equity stakes in Myer and Breville Group, reported its first-half ­results yesterday, revealing its earnings workhorse Smiggle had posted its slowest sales growth since it was acquired in 2008.

This was countered by its other fashion brands, which despite the tough retail environment managed to post strong like-for-like sales, as outlets such as Just Jeans and Portmans ­defied the clothing and apparel gloom to accelerate same-store sales growth.

Sales for Smiggle hit a record $179 million for the half, but were only up 4.6 per cent compared with double-digit sales growth in the past, as the popularity of the stationery store swept through Australia and then on new markets in Asia and Britain.

Such was the confidence in the brand in 2017 that Mr Lew predicted Smiggle would hit sales of $450m by 2020, but yesterday those aims were pushed back as the increasing and widening Brexit mess soured sales for most retailers across Britain and pommeled consumer confidence.

Premier is now forecasting it will hit that sales mark by calendar 2021 or 2022.

“This once-in-a-lifetime event has just lurched from one political disaster to another,” Premier ­Investments chief executive Mark McInnes said.

His comments came as Premier reported a record interim net profit of $88.8m, up 13 per cent, as sales — also a record high — rose 8 per cent to $680.2m.

“It (Brexit) has created deep uncertainty in the country which has led consumers to dramatically slow their spending. We’re not immune to that. It’s like somebody in the classroom getting a cold and everyone else catching it.”

However, Mr Lew and Mr McInnes still outlined new global expansion plans for Smiggle, also unveiled yesterday, that would see the brand launched in an arc stretching from The Philippines and South Korea across to the United Arab Emirates, ­Europe and Canada to place it ­before more than 775 million customers in 10 new countries.

As part of an enhanced retail and wholesale model that would also require less capital investment on the part of Premier and accelerate its ambitions to ­become a truly global retail brand, the Melbourne-based Premier would link arms with a number of partners including Amazon, Chinese online giant Alibaba, wholesalers in Asia and a Canadian retailer to take Smiggle to the world.

“It is delivering it at a much faster growth rate than doing it ourselves in relation to hand-picking sites and having to ­commit to long-term leases,’’ Mr Lew said.

Meanwhile, Premier Retail, the fashion division and key operational business, recorded earnings before interest and tax of $113.m for the first half.

During the first half same-store sales for Just Jeans rose 14.6 per cent, Jay Jays was up 7.7 per cent, Portmans increased 9.5 per cent, Jacqui E was up 2.1 per cent and Dotti comparable sales rose 2.7 per cent.

Mr McInnes said the fashion chains had snatched market share from their rivals.

Premier’s balance sheet includes an equity-accounted value of $238.9m for its holdings in ­appliances company Breville Group. The present market value of the investment is $602.6m, based on a share price of $16.51 on March 20.

Its stake in department store Myer is valued at $34.9m against a current market value of $50.4m.

The company declared an ­interim dividend of 33c a share, a rise of 13.8 per cent, and payable on June 14.

Shares in Premier ended down 11c at $16.40.