Solomon Lew’s Premier Investments posts 29% profit lift, believes it can win sales in a recession

Retail conglomerate Premier has made a profitable pivot to online sales, but is threatening to close as many as 350 stores if landlords don’t give ground on rent.

Premier Investments will be closing Smiggle stores worldwide.

Solomon Lew is confident the portfolio of fashion chains owned by Premier Investments, ranging from sleepwear to school stationery, can withstand the worst of the COVID-19-induced recession as it pivots to online and shuts unprofitable stores where shopping centre landlords refuse to budge on rent.

The billionaire businessman, who is chairman of Premier Investments, told The Weekend Australian the strong stimulus being provided to the Australian economy should help keep people employed and buttress consumer spending as the nation enters its first recession in 30 years.

Premier Investments also believes its outlets, such as Smiggle, Portmans, Just Jeans and Dotti, will be in the driver’s seat to win some of the estimated $68bn typically spent on overseas travel by Australians which will now be redirected to fashion, apparel and other consumer goods.

“I think the government is putting a fair amount of stimulus into the market and I can see that they are thinking long-term. The whole focus of the Prime Minister and the Treasurer and the Reserve Bank governor is on jobs and doing whatever it takes to keep people employed,’’ Mr Lew said after his Premier Investments on Friday posted a 28.97 per cent lift in full-year profit to $137.75m.

“This tells you where they are at and therefore we are confident — we are seeing very positive sales. If you think people were concerned then they wouldn’t be shopping, but people are shopping.”

And Mr Lew believes these shoppers are increasingly spending their money at Premier Investments’ fashion chains such as Peter Alexander, Jay Jays, Portmans, Dotti and Smiggle, with his retail businesses winning market share.

“It tells us also that our brands, our positioning in the marketplace, our offering, our pricing is far superior to our competitors. Look at the first half of this year — we had a record result and there was no pandemic then: we were fighting Brexit, we were fighting bushfires, protests in Hong Kong and we still managed to bring out unbelievable sales and profit results, so it tells you about the strength of the company.”

He was backed up by Mark McInnes, the chief executive of Premier Investments’ retail operations, who on Friday said government action combined with the move into a new season and the strength of the company’s fashion brands should see the company succeed even in a recession.

“We are coming into summer (and) you need to buy new clothes. There will be a natural requirement for people to change their wardrobes and as (Mr Lew) said we think we have better products than our competitors.

“Also, the $68bn that people used to spend on travel overseas is now not being spent on travel overseas, that has to be spent in the local economy. And the government and Reserve Bank governor are ensuring the economy is stimulated, either through fiscal policy — and I’m sure we will hear more about that from the Treasurer in the weeks ahead — and the RBA governor said they would do whatever it takes to get up the other side.

“While there are negatives, there are also positives and the greatest positive is we have seven very distinct brands that are taking market share.’’

Premier Investments capped off the 2020 earnings season with a leap in profit as revenue for the 12 months to July 25 fell 2.08 per cent to $1.248bn. In Melbourne, 165 of its stores have been shut since July as the city goes through stage 4 restrictions.

The financial impact of COVID-19 was most severe for the period from March 11 to May 15, when global sales were down $131.1m on the previous corresponding period, with retail store sales down 78.4 per cent.

But like many other retailers, Premier Investments has pivoted to online sales as consumers, locked up in their homes, choose to shop on the web, with the company’s retail chains posting a 48.8 per cent lift in online sales to $220.4m for 2020.

There were varied performances in the wake of COVID-19. Peter Alexander sales rose 16.3 per cent to $288.2m, Just Jeans sales fell 1.2 per cent to $238.8m, Jay Jays sales rose 0.8 per cent to $170m, Dotti’s sales fell 9.7 per cent $96m, Jacqui E sales fell 13.7 per cent to $61.7m and Portmans sales fell 18 per cent to $105.3m.

For fiscal 2020, Smiggle’s total sales fell 16.4 per cent to $256.3m. It did, however, post record global online sales of $42.3m, up 41.8 per cent. Once the key profit engine for Premier Investments, the retailer has taken the decision to close down a string of Smiggle stores from Asia to Britain and book $31.4m in impairment costs.

Premier Investments said that to ensure Smiggle was best placed to rebound and grow once the COVID-19 crisis had passed it would close the final four stores in Hong Kong by the end of October, shut up to 55 stores out of 131 stores in Britain in 2021 and impair 100 per cent of its British store assets. It will also impair all Smiggle international stores’ assets in Hong Kong, Singapore, Malaysia and Ireland.

Premier Investments was eligible for $68.7m of global wage subsidies across seven countries, of which $49m was received as at July 25. Of the total amount, $35.5m was passed directly through to eligible employees unable to work.

Premier Investments declared a final dividend of 36c, against last year’s 37c, to be paid on January 28. An interim dividend of 34c that was declared in March but delayed will be paid on September 30. Shares in Premier Investments closed down 13c at $19.