Solomon Lew’s Smiggle booms in the UK adding impetus for demerger cosideration

Stationery chain Smiggle is booming in the UK, giving retail billionaire Solomon Lew handy earnings as he mulls demerging it from his Premier Investments vehicle.

Sales and profits for Smiggle are booming in the UK. Picture: Liam Kidston

The British arm of stationery chain Smiggle, which will form a core pillar of a future demerged Smiggle group if billionaire Solomon Lew decides to break up his listed fashion vehicle, has returned to its strong growth trajectory after a difficult few years through Brexit and the pandemic.

Smiggle’s 107 stores spread across the UK are proving to be a handy generator of sales and earnings for Mr Lew’s Premier Investments which owns Smiggle along with other retailers such as Peter Alexander, Just Jeans and Portmans.

Its thriving offshore expansion is part of the compelling reason Mr Lew is now toying with the idea of splitting it off.

Latest accounts lodged in Britain show Smiggle UK’s annual sales in the 2023 financial year hit £57.44m ($109.7m), up from £54.05m in 2022 and £41.014m in 2021.

Earnings are also on the rise. Smiggle UK posted a net profit for the 12 months to July 29, 2023, of £2.334m against £2.09m in 2022. This was down sharply from a profit of £6.966m in 2021 – although the 2021 accounts were boosted by almost £5m in Covid-19 government grants.

Premier Investments chairman Solomon Lew. Picture: Aaron Francis

Smiggle is now in a much stronger financial position as the latest 2023 accounts show it is sitting on cash of £12.8m.

The impact of Brexit and the pandemic on Smiggle UK was volatile. In 2020 Smiggle UK lurched to a loss of £13.1m as stores and schools were shut and significant impairments plunged the business deep into the red.

But now Smiggle UK is starting to string together consecutive years of sales and earnings growth – just as Mr Lew’s $4.63bn Premier Investments vehicle is considering a demerger of its sleepwear chain, Peter Alexander, and Smiggle into newly listed companies where both brands can chase growth opportunities overseas.

Smiggle UK is well down the path of that international expansion already. It currently has 110 stores in Britain, which makes up one third of Smiggle’s total store network, and its annual sales of just under $110m is against total sales for Smiggle of about $320m.

At its recent half-year results Premier Investments cited a challenging discretionary retail environment in which Smiggle consumers were exposed. This resulted in Smiggle delivering half-year sales of $183.9m – down 3.6 per cent.

However, for the 12 months to January 2024 Smiggle delivered global sales of $312.9m, which was up 2.4 per cent on the previous comparable period.

At one point Smiggle had 138 stores in Britain as it rolled out its network driven by a strong growth ambition, but that was curtailed after Brexit and Covid-19.

Smiggle is becoming a hit globally just as it is possibly demerged from parent Premier Investments. Picture: Tara Croser

If Mr Lew decides to trigger a demerger of Premier Investments, that overseas growth aspiration could be a new focus for an independently listed group under which Britain as well as further expansion through South East Asia and parts of the Middle East could be on the agenda.

At the release of Premier Investments’ half-year results in March Mr Lew, who is the biggest shareholder at Premier and its chairman, updated the market on its demerger discussions saying Smiggle could be listed by the end of January as a standalone business. It was also exploring the demerger of Peter Alexander into another ASX-listed entity during the 2025 calendar year.