Billionaire and former RBA board member Solomon Lew says RBA caught in ‘international squeeze’ over rates, inflation
Billionaire and former Reserve Bank board member Solomon Lew says the central bank is caught in ‘international squeeze’ over interest rates and inflation after his retail group posted record sales.
Former Reserve Bank board member Solomon Lew said RBA governor Philip Lowe has been “caught in an international squeeze” on interest rates and inflation as a string of rate hikes begin to weigh on spending across the economy.
The billionaire and chairman of retail group Premier Investments said while rate rises pushed through by the RBA since May had begun to weigh on the consumer, he was hopeful the nation is approaching the top of the cycle of interest rate hikes and inflationary pressures.
“They (the RBA) are caught in an international squeeze and that is creating the issue,” Mr Lew said.
“So higher inflation … the big issue has been rising interest rates on homes, and that’s become an issue, but I think that we may be seeing the top of that cycle at this point in time. The RBA has continued to lift rates higher in response, which no doubt will cause consumers to watch their discretionary spending.”
Mr Lew, who served on the RBA board from 1992 to 1997, told The Australian that key economic data due out this week could give the central bank further insight into the state of the economy. The RBA is weighing whether to push the button on another rate rise in April or pause after 10 interest rate hikes since May 2022.
“I think it somewhat depends on the retail sales numbers that will be out tomorrow (Tuesday). And I think that they’ll be able to get a better gauge between that and what’s going on in the real estate market and somewhat in the car market as well as to where they go to from there.”
Premier Investments - whose retail brands include Smiggle, Portmans, Just Jeans and Peter Alexander - is yet to show any signs of strain under an interest rate tightening environment.
The company posted record half-year sales that helped fuel a 17 per cent lift in its interim dividend as well as a 16c per share special dividend with the group now pondering an ambitious offshore expansion for its blockbuster sleepwear brand Peter Alexander.
Premier, which also has large equity stakes in kitchen appliances company Breville and department store owner Myer, on Monday unveiled an 18.9 per cent rise in its revenue for the 26 weeks to January 28 as net profit rose 6.5 per cent to $174.3m.
Investors will enjoy bumper dividends flowing from the company’s record retail sales and earnings, with the interim dividend lifted to 54c per share from 46c last year, as well as a special dividend of 16c per share to be paid on July 26.
Premier ended January with almost $500m of cash on hand generated from its portfolio of fashion and apparel brands as well as its investment portfolio.
Meanwhile, its sleepwear brand Peter Alexander posted record global sales, while its Smiggle stationery retail chain rebounded to post a 30 per cent jump in global sales.
Premier also has big plans for Peter Alexander, unveiling offshore expansion plans that could see it grow across 35 countries via an e-commerce platform that will be launched next year. It is expected that this online launch will be followed later by physical Peter Alexander stores overseas as well.
The retail and investment group said the second half had started off strongly, with total global sales across its retail chains for the first six weeks up 7.7 per cent on the previous corresponding period.
Premier Investments ended the half with cash on hand of $470.4m after handing out $125.8m in fully franked dividends to shareholders in the last six months.
Premier Investments retail arm, called Premier Retail, posted global sales of $905.2m, up 17.6 per cent and up 23.7 per cent on pre-Covid-19 first half of 2020.
The company, whose fashion and apparel brands include Portmans, Smiggle, Peter Alexander, Dotti and Just Jeans, said online sales of $170.9m were down 12.5 per cent.
Premier said it booked record Peter Alexander sales of $261.7m, up 15.1 per cent, while Smiggle rebounded with global sales of $190.7m, up 30.3 per cent.
Mr Lew said Premier’s retail arm was uniquely positioned to continue to deliver with its brands identifying key growth paths for the future, while leveraging synergies within the group’s global operations.
Premier Retail chief executive Richard Murray said it had opened the second half strongly and was well-positioned to drive growth from its powerful retail model.
“We remain focused on continuing to deliver relevant and quality products, enhancing our digital offering, optimising our store portfolio and identifying new store opportunities to support growth. We are also focused on identifying and executing new offshore market opportunities for Smiggle and Peter Alexander.”
Mr Murray, the former boss of consumer electronics retailer JB Hi-Fi, said the group hadn’t witnessed any trading down by consumers or smaller shopping baskets in response to the higher interest rate environment and rising inflation.
Premier Investments said Peter Alexander was planning for future offshore opportunities, as it also had identified 20–30 opportunities for both new and/or larger format stores to better showcase the wider product offering that has been developed in recent years.
That would be complemented by an aggressive offshore expansion through e-commerce platforms with plenty of opportunities to also open physical stores outside Australia and New Zealand around one year after the online roll out.
“Do we see a world of stores outside of Australia and New Zealand for Peter Alexander?” added Mr Murray, “absolutely we see that opportunity.”
Its apparel brands division— led by Just Jeans, Portmans and Dotti – collectively delivered record sales for the half of $452.8m, an increase of 14.3 per cent. The apparel brands traded from 26 fewer stores in the first half. Just Jeans, Portmans and Dotti all delivered record first half results. Jacqui E delivered its highest first half sales result in over a decade, and Jay Jays delivered its second-best first half sales result in the past decade.
Premier Investments shares ended down 63c or 2.5 per cent to $24.70.
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