Solomon Lew’s Smiggle swings to profit in the UK after years of losses caused by Brexit, Covid-19

Once touted as a driver of ‘super profits’ for Solomon Lew’s retail group Premier Investments, the UK arm of Smiggle has finally returned to profit.

Smiggle UK, owned by Solomon Lew’s Premier Investments, returned to profitability in Britain in 2021 after years of losses driven by Brexit and Covid-19. Picture: Liam Kidston

The British arm of stationery retailer Smiggle, which for years held out hope as an engine of super profits for billionaire Solomon Lew’s Premier Investments, has finally booked a profit following years of losses that were triggered by Brexit and exacerbated by Covid-19.

Smiggle UK has swung back to a full-year profit of £6.97m ($12.1m) for 2021 against a loss of £13.1m in 2020 when the crushing costs of shuttered stores and the closure of schools due to the pandemic as well as significant impairments plunged the business deep into the red.

According to accounts lodged with the British corporate registrar, Smiggle UK still suffered a retreat in sales for the 12 months to July 31, 2021 as revenue slid to £41.0m from £50.6m in 2020.

The pullback in sales also came as Premier continued to exit stores in Britain, with Smiggle leaving 21 sites through the year to leave it with 114 stores as well as an online platform at the end of fiscal 2021.

“Despite the reporting period being significantly impacted by temporary store closures due to government mandated Covid-19 lockdowns, Smiggle UK showed a substantial return to profitability and closed the year with a strong balance sheet and net cash position,” a Premier spokeswoman said.

“Premier Investments looks forward to updating shareholders with Smiggle’s results for the current financial year in September 2022.”

Premier Investments chairman Solomon Lew and CEO Richard Murray at the Smiggle store in Melbourne’s CBD. Picture: Ian Currie

Smiggle UK reported in its 2021 accounts that it had witnessed a return to sales growth since August 2021, driven by no Covid-19 related closures and schools remaining open but there remained significant uncertainty over the continuing economic impact from Brexit, Covid-19 and the war in Ukraine. A further three Smiggle stores were permanently closed since the balance date.

The colourful stationery retailer burst onto the British market with high hopes in 2014 and like its performance in Australia booked significant sales and earnings growth as children fell in love with its dazzling array of pencil cases, backpacks and folders – and convinced their parents to pay for them.

In 2018, Premier chairman and biggest shareholder Mr Lew, who holds a 42.43 per cent stake in the group, unveiled an ambitious global growth strategy for Smiggle which included its fast-growing British business.

Along with then Premier chief executive Mark McInnes, the billionaire retailer announced a major strategic acceleration of the global growth plan for Smiggle with the aim to deliver $450m in global Smiggle retail sales by 2020. At the time, Smiggle had achieved record global sales of $293m in fiscal 2018.

However, global economic forces and later a pandemic help snuff out those global dreams for Smiggle.

That was especially the case in Britain. Smiggle UK skidded to a near £9.17m loss in the UK for 2019 as Brexit hit earnings, and it took a costly one-off hit from accelerating the write-off of its British store leases. That loss marked the first time Smiggle has made a loss in the UK since 2014 when it first opened and began its rapid international expansion that included opening stores in Asia.

Much of the initial pain to Smiggle UK’s accounts was caused by Brexit and the economic uncertainty that generated while Covid-19 plunged its performance even lower given the strong link between Smiggle’s sales and children going back to school and schools were shuttered. The 2020 accounts included a £10.481m impairment reflecting uncertainty around future trading conditions and the pivot by shoppers from bricks and mortar stores to shopping online.

Smiggle as a brand has now begun to recover. In 2021, Smiggle saw its global sales drop around 17 per cent to $213.4m. But for the first half of 2022, they were up rose 5.6 per cent to $146.3m.

In Britain, the company is steadily improving, with the 2021 accounts showing pre-tax earnings of £8.34m against a pre-tax loss of £13.52m in 2020. Smiggle UK also ended 2021 in a strong cash position, having cash of £9.8m on hand compared to £7.08m in the previous year.

Smiggle as well as its other stablemate fashion brands owned by Premier including Just Jeans, Portmans, Peter Alexander and Dotti, are now the responsibility of recently appointed Premier CEO Richard Murray. Mr Murray, who previously ran electronics giant JB Hi-Fi, was appointed a director of Smiggle UK in March.