Solomon Lew says economic settings have never been better, can’t understand why the federal government is looking so bad in the polls
The Premier Investments boss says settings are right for consumers to spend up, and he can’t understand the government’s poor poll ratings.
Solomon Lew – the billionaire businessman whose Premier Investments straddles fashion, apparel and kids stationery – says he believes the nation’s macro-economic settings have “never been better” with consumers flush with cash, unemployment low and shoppers ready to spend.
But there is one thing Mr Lew says he just can’t understand: why the Morrison government is looking so miserable in the polls and is looking like heading for a wipeout at the looming federal election.
“They (consumers) are loaded with cash, full employment. That’s the key isn’t it? I mean, it’s never been better and that’s why I’m looking at the polls and I don’t understand them,” Mr Lew told The Weekend Australian as his Premier Investments on Friday reported a 13 per cent slide in its interim profit, but loaded with its own cash pile managed to ratchet up the dividend to a record high.
Mr Lew, who along with his Premier Retail chief executive Richard Murray are both vocal supporters of the Liberal Party, said he was expecting Josh Frydenberg next week to deliver a federal budget that is supportive of employment growth and business investment.
“This government has delivered very strongly on the economy, in every way possible. And I‘m expecting a very balanced budget that will keep full employment and keep the wheels of business turning,” Mr Lew said.
In December – at an Australia Israel Chamber of Commerce luncheon where the guest speaker was Mr Frydenberg – Mr Murray as the newly installed chief executive of Mr Lew’s Premier Investments retail arm called on voters to re-elect Mr Morrison. He argued from the stage that Australians will “do the right thing” and re-elect the Morrison government at the next election.
When it comes to Premier Retail’s businesses, which include retail chains Peter Alexander, Smiggle, Portmans, Just Jeans and Jay Jays, Mr Murray believes consumers are in the right frame of mind and the economy is at the right setting to encourage spending at his stores.
“I think the good thing for us from a macro perspective is it is well telegraphed that both customers and small businesses, broadly, the cash balances in the economy are very solid, so that’s a tick … It remains an uncertain period when you look out both for business and consumers with an election coming up but you know when you get out into stores and you see online numbers and you see students going back to school for Smiggle and our Easter range for Peter Alexander, there‘s a lot to be excited about.”
Going into a store in the first half of fiscal 2022 was a problem for shoppers due to lockdowns with Premier Retail stores shut for most of the first quarter equating to 42,675 trading days during the period.
This showed up in the results with Premier Investments posting a 13 per cent slide in its statutory interim net profit to $163.644m for the 26 weeks to January 29 as revenue fell 1.93 per cent to $770.329m. But the combination of Premier Investments sitting on cash at hand of $468.6m at the end of the second half and a strong balance sheet allowed it to lift its dividend to a record high of 46 cents per share, up 35.3 per cent on the previous corresponding period. The interim dividend will be paid on July 27.
Petrol prices, inflation and the war in Ukraine remain a concern and Mr Murray said there were “always things going on in customers’ minds” but that it was incumbent on retailers to get customers excited.
“And so you‘ve got to give customers a reason to shop. Some people go and buy a pair of jeans because they probably need to replace a pair of jeans. But a lot of what we do is inspiring customers with new fashion to upgrade their wardrobe,” he said. “Customers have a lot of choices. And so what I feel comfortable with is the customers are already in a good spot, there‘s always noise and moving parts and we’re putting our best foot forward and on top of that the basics of retail.”
Analysts at the earnings briefing for Premier Investments on Friday pushed Mr Lew for any guidance on possible merger and acquisition activity given the company’s bloated cash holdings, but he would only say Premier Investments was always looking for opportunities. Later Mr Lew said an acquisition would need to be “the right fit” for the company and its existing retail operations.
“And this is in no way defensive,” added Mr Murray, “I just make the observation that with poor M&A you pay for it forever and there are a lot of bad businesses for sale but there are … few great businesses or the ones that plug into our infrastructure.”
It came as at its stable of retail chains it was again sleepwear outfitter Peter Alexander that led the charge followed by a return to better financial health by Smiggle after being knocked around by Covid-19 and home schooling.
The company reported record sales for Peter Alexander of $227.4m, up 11.4 per cent while Smiggle was showing positive momentum with sales up 5.6 per cent to $146.3m. The group’s five apparel brands – Just Jeans, Portmans, Jacqui E, Dotti and Jay Jays – delivered sales for the half of $396.2m down from sales of $422.6m in 2021.
In a trading update Premier said early signs of a recovery have become apparent with its retail arm showing total global sales for the first five weeks up 6.2 per cent on the second half of 2021.
Shares in Premier Investments ended down 46 cents at $28.48.
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