Premier Investments scraps dividend

Billionaire Solomon Lew’s slimmed down Premier Investments has posted a profit drop, but is banking on a big future for its treasured brands.

Premier Investments chairman Solomon Lew and interim CEO John Bryce. Picture: Louis Trerise

Billionaire Solomon Lew’s Premier Investments is aiming to lift its tiny foothold in the British market after a fumbling start for sleepwear brand Peter Alexander, the face of the retailer’s international ambitions.

Mr Lew called out the particularly difficult economy in Britain where Peter Alexander has opened three stores, incurring $6.3m in start-up costs, and disappointing sales.

He also said the company was conducting an investigation into the conduct of certain unnamed executives, during a media briefing on Friday. Mr Lew declined to comment further on that probe, except to say “it is a very serious matter”.

“I can confirm that we still have an ongoing investigation into certain past practices by former executives and others in the company, so I presume that as soon as all the investigations are completed we will disclose our findings, if appropriate and if approved by our legal advisers.

“That is all I am going to say on this issue at this point in time.”

Premier Investments last year sacked its former Smiggle boss John Cheston for alleged inappropriate behaviour, which Mr Cheston denies. The nature of this allegation has never been disclosed.

Meanwhile, Premier Investments the cashed up retail conglomerate is considering acquisitions, potentially in health and beauty, following the sale of five apparel brands - Just Jeans, Portmans, Dotti, Jacqui E and Jay Jays - to Myer, leaving Mr Lew’s company unusually slimmed down.

Mr Lew said there was some “rebuilding” to do at kids stationery chain Smiggle. Together with difficult trading conditions at Peter Alexander, it dragged Premier Investments to a decline in group profit and a decision to cancel its interim dividend.

The billionaire was nonetheless upbeat about Smiggle’s fortunes with the end of the latest writers’ strike in Hollywood refilling the pipeline of movies to be released which Smiggle could ink merchandise deals with. Premier Investments has also delayed a possible spin-off of Smiggle.

Revenue for the 26 weeks to January 25 fell 1.7 per cent to $875.1m and interim net profit slid 34 per cent to $117.1m. However, net profit for its continuing operations – taking into account the Myer transaction – was down 18.4 per cent to $101.3m.

Given the accounting complexity, analysts said the market will focus on the earnings of the continuing operations (Peter Alexander and Smiggle) where sales declined 1.8 per cent and earnings declined 16 per cent.

Mr Lew described a patient approach to breaking into the UK market.

“It’s a brand new business, they don’t know the brand ... it is starting to resonate and we are getting good online response. But the UK market is very deflated at the moment, and retail business right across the board is extremely difficult.

“We are investing for the long term.”

It won’t open any more stores in the UK until it sees a recovery in the economy and growing brand awareness.

Mr Lew “didn’t have a doubt” Peter Alexander would succeed in Britain.

Even so, Peter Alexander achieved record sales of $297.7m for the half, up 6.6 per cent, but some analysts raised concerns start-up costs could swell into the tens of tens of millions of dollars.

Smiggle, once a growth engine for Premier Investments, reported sales fell 14.5 per cent to $157.3m.

The conglomerate’s focus is now on leveraging the two high-margin brands to ramp up growth in existing markets as it sets its mind to turning the sleepwear and stationery chains into truly international brands.

It will do so with a strong balance sheet bolstered by its equity stake in kitchen appliances maker Breville, which was valued at $1.33bn at the end of the first half, cash reserves of $337m, and ownership of an office tower in Melbourne and its distribution centre.

Premier Investments chairman and retail billionaire Solomon Lew Picture: Luis Enrique Ascui

“The outcomes and value created for Premier shareholders in the first half represents the culmination of years of focus and investment in our brands through providing quality and exciting products to our customers while creating and unlocking value for our shareholders,” said Mr Lew.

Peter Alexander’s first three UK stores and dedicated UK website launched during November 2024 in prime London shopping centres (Westfield London, Westfield Stratford and Kent Bluewater).

However, leaked Premier Investments documents reported by The Australian showed the British stores were trading substantially below targets in the lead up to Christmas.

Despite this, Peter Alexander has more than 15 further store opportunities identified in Australia and New Zealand in the near term.

The 14.5 per cent fall in Smiggle’s sales for the first half was blamed on a challenging global discretionary retail environment with the Smiggle customer particularly exposed to increased cost of living pressures in all markets.

At the end of the half, the brand operated 307 stores across its ‘proprietary markets’ of Australia, New Zealand, United Kingdom, Ireland, Singapore and Malaysia. Smiggle is aiming to open more than 10 new stores.

Premier Investments expects to declare a final dividend at its full-year results in September. Over the past five years, Premier Investments has distributed over $850m in fully franked dividends to shareholders and recently distributed 890.5m Myer shares it accepted in consideration for its apparel brands.

Mr Lew said cost-of-living pressures were still current in the Australian economy, with energy, food, fuel and health bills higher and he was looking to next week’s federal budget for further guidance on the economic front.

But he was concerned about the growing debt fuelled by government spending which future generations will be saddled with.

“Its been spend, spend, spend by the government and I’m concerned for the generations that are behind me that they will never be able to pay off the debt.”