Top of Solomon Lew’s hit list – the government and executive defectors

It’s a toss-up between who/what tops billionaire retailer Solomon Lew’s hit list of dislikes – the current Labor government or John Cheston, the guy Lew recently sacked as head of the kids’ stationery business Smiggle.

The government has earned Lew’s ire for what the billionaire describes as the mismanagement of the economy. Meanwhile, Cheston committed the dual sins of disloyalty – he announced he was defecting to jewellery chain Lovisa, part of the conglomerate run by fellow retail billionaire Brett Blundy, and engaged in alleged misconduct while in charge at Smiggle.

Solomon Lew has placed spin-offs of Smiggle and Peter Alexander on ice.

Lew says he was blindsided by Cheston’s defection, having been informed of the exit just three minutes before Lovisa told the market. So that one clearly stung.

Lew’s company, Premier Investments, didn’t wait for Cheston to serve out his year-long notice but dismissed him after three months citing (alleged) serious (but unspecified) misconduct. Just this week Cheston was stripped of millions of dollars of performance shares.

Lawyers acting for Cheston have said he categorically denies allegations of misconduct.

In being critical of the government, Lew joins a long list of big-end-of-town businessmen who have taken issue with how Labor is performing.

Rather than highlighting industrial relations concerns as other business leaders have, Lew’s criticism speaks to a broader concern. He believes the Albanese government is playing populist politics rather than taking decisions needed to properly manage the economy.

Lew believes that the Reserve Bank should share no blame in its need to retain high interest rates, but that the government’s overspending in various areas such as infrastructure bears (an unspecified amount of) blame.

Curiously, the government populism that Lew decries is not a criticism that he also directs to the Coalition. Many others in the big end of town would beg to differ.

In one breath, Lew talks about the government’s mismanagement and its need to make positive decisions about the economy. In the next, he declares that in the 61 years of his retail career, he has never seen it this bad.

That said, the standout underperformer in Premier’s stable of brands in the 2024 financial year was Smiggle, which in part reflected its international profile. Its sales fell 7.4 per cent year-on-year and were 3.4 per cent down on the 2019 pre-COVID performance.

Smiggle’s spin-off has been delayed.Credit: Louie Douvis

Lew also suggested that its underperformance may have been influenced by management distraction.

The way Lew sees it is that in the current cost-of-living crisis, parents can do without buying another colourful backpack or water bottle for their children.

The best in brand class was won comprehensively by Peter Alexander, which managed to push through the half-billion sales mark for the first time. Next month it will open the three outlets in the UK – a test to see how the brand will translate with the British. (So no new $40 lunchboxes for the kids, but parents seem happy enough to fork out $140 for Peter Alexander pyjamas.)

Smiggle’s result clearly appeared to concern analysts who were briefed on Wednesday morning.

The result coincided with the decision by Premier to put on ice the demerger of Smiggle and Peter Alexander, which was scheduled for early next year.

The demerger hiatus was greeted poorly by investors who sent Premier’s stock down 9.1 per cent, and appeared to ignore the 16.7 per cent dividend increase, or that gross margins improved, or that its inventory levels were tight as a drum.

Instead, Lew said the strategic priority was the deal engineered to merge Myer with Premier’s five apparel brands, Jay Jays, Dotti, Portmans, Just Jeans and Jacqui E. He said this deal was still going to the due diligence stage but that no red flags had emerged.

But the promise of the Myer deal being a near certainty didn’t lift the mood of investors.

Maybe we can add a falling share price to Lew’s list of dislikes.

The Business Briefing newsletter delivers major stories, exclusive coverage and expert opinion. Sign up to get it every weekday morning.