Solomon Lew’s Premier Investments forecasts full-year rise in profits

Solomon Lew’s Premier fashion empire says a bounce back from COVID carnage will lift full-year earnings by as much as 11pc.

Premier Investments chairman Solomon Lew, right, with CEO Mark McInnes. Picture: Aaron Francis

Solomon Lew’s Premier fashion empire has brushed off the retail carnage caused by the COVID-19 pandemic to forecast full-year profits will improve by as much as 11 per cent, with its bottom line bolstered by the JobKeeper government wages subsidy package and its customers switching to online shopping.

ASX-listed Premier Investments, in an update for its fashion investment arm on Thursday, said it had benefited from government stimulus packages including rent and wage subsidy schemes as stores were forced to temporary close amid coronavirus lockdowns.

In March, Premier temporarily closed around 900 of its fashion outlets and sent home 7000 staff.

The owner of brands including Just Jeans, Portmans, Peter Alexander and Smiggle blamed the pandemic for second-half sales falling $106.5m, or 18 per cent, to $484.2m.

However. it said a booming online business and stronger margins for in-demand fashion would help pump up profitability.

Premier’s key fashion labels enjoyed bumper sales online, mirroring similar performances by other fashion and apparel retailers who were flooded with online orders as stores were closed, shopping centres became ghost towns and consumers were stuck at home.

The rosier outlook coupled with Premier Investments heading for another year of record profits helped send Premier Investments shares soaring, closing up $1.13, or 6.67 per cent, at $18.05.

Investors could also receive a boost to their dividends with the interim dividend this year delayed because of the COVID-19 pandemic and the company now looking in a strong financial position to up its final dividend.

Premier said its fashion arm, Premier Retail, would report global sales for the second half of $484.2m.

Despite the headline 18 per cent drop in sales and a related decline in gross profit, Premier Retail’s online sales and EBIT growth continued to accelerate to deliver record earnings.

Online sales of $123.3m in the second half were up $50.8m or 70 per cent and contributed 25.5 per cent of its total second half sales, more than double the rate in 2019.

Premier Retail’s full year 2020 online sales were $220.4m, up 48.8 per cent on 2019, contributing 18.1 per cent of total sales.

Premier, which also holds large shareholdings in department store Myer and appliances company Breville, said it now expected second half EBIT to be between $58.7m and $59.7m, up between 9.7 and 11.7 per cent.

The better result was driven by reduced costs as it shut down stores, a strong online performance, solid sales growth and a subsequent significant gross margin since gradual reopening globally, and using government rent and wage subsidy schemes.

As a result of the strong second half EBIT, Premier Retail now expects full-year 2020 EBIT to be between $184.8m and $185.8m, up between 10.5 and 11 per cent.

“Premier Investments has and continues to maintain a strong balance sheet. The above trading update relates to Premier Investments’ wholly owned Premier Retail segment and does not include any results from its investment division,’’ the company said.

Premier Investments expected to release its 2020 results in late September.