Solly Lew delays Smiggle, Peter Alexander spin-off amid Myer talks
By Jessica Yun
Rag trade billionaire Solomon Lew’s Premier Investments has postponed plans to spin off Peter Alexander and Smiggle to focus on talks to sell its Apparel Brands business to Myer, of which Premier is also the biggest shareholder.
The retail group had signalled it would no longer aim to turn its successful pyjama and kids stationery brands into standalone companies by January, but will instead prioritise due diligence talks with the department store, which is looking at acquiring Jay Jays, Just Jeans, Dotti, Portmans and Jacqui E, collectively known as Apparel Brands.
Billionaire businessman Solomon Lew.Credit: Eamon Gallagher
The potential deal comes after years of campaigning against Myer’s previous management, which Lew lambasted for lacking retail expertise and failing to provide shareholder value.
New Myer executive chair Olivia Wirth intends to use Apparel Brands to expand Myer’s loyalty program and lure a new, younger generation of shoppers into the department chain with a focus on exclusive labels that generate higher margins.
Lew indicated the onus was on Myer to prove that a deal would have value for his company. “Premier has the expertise, but Myer doesn’t,” Lew told reporters on Wednesday morning.
“Myer has been a major disappointment, in some cases, an embarrassment as such. I think that now under the new leadership, I think that as an investor, on behalf of Premier, I see some very good signs going forward.”
Lew owns nearly a third (31.4 per cent) of the Myer business, and in late 2022 installed his choice of director to the board following concerns of underperformance at the department chain. The strategic change of plans was announced on Wednesday as Premier Investments released its latest results.
For the 2024 financial year, Premier’s statutory net profits dropped 4.9 per cent to $257.9 million and sales revenue fell 2.9 per cent to nearly $1.6 billion.
Pyjama brand Peter Alexander was the best performer among Premier’s retail brand stable, with sales increasing 6.2 per cent to $508.6 million. Sales at youth and stationery store Smiggle fell 7.4 per cent to $296 million. Apparel Brands saw sales drop 6.4 per cent to $790.7 million.
Premier took the market by surprise after sacking long-time Smiggle boss John Cheston earlier this month. Cheston announced in June he would resign to head up jewellery retailer Lovisa, run by rival retail billionaire Brett Blundy. In a statement, Premier said Cheston had been terminated for “serious misconduct and a serious breach of his employment terms”.
“It’s clear management lacked focus on that particular brand,” Lew said of Smiggle’s results on Wednesday.
“I can honestly say we hardly lose any staff to competitors,” he added. “If you’re going to ask me if Brett Blundy has called me yet, we know each other pretty well, no, I haven’t received a call from him.”
Lew declined to comment on whether he was pursuing legal action against Cheston.
Peter Alexander’s store footprint is set to grow, with four new stores due to open this year across Australia and New Zealand. Premier has also identified 20 “further opportunities” for new or large-format stores.
The pyjama brand, which encompasses men’s, women, children’s, plus-size clothing and gift-giving, is also heavily investing in marketing in Britain, where it will launch a UK website and three stores in London shopping centres by November.
“There’s a lot of competition in the marketplace, but not for Peter Alexander,” said Lew.
Peter Alexander was the standout performer in Premier Investments’ 2024 results.Credit: Louie Douvis
Smiggle, which already has about 180 stores across Europe and Asia, also has more in the pipeline.
Premier’s online sales decreased by 2.9 per cent to $315.3 million. E-commerce represents about a fifth of the overall business.
Despite the reluctance of shoppers to part with their money amid ongoing cost-of-living pressures, Premier Investments increased gross margins by 35 basis points to 62.6 per cent.
The company has announced a fully franked final dividend of 70¢ per share, taking the full-year payout to 133¢ per share.
Investors seemed unimpressed with Premier’s results, sending its share price 9.1 per cent lower to $30.61 at close.
“The announced delay to the strategic review and increased focus on the Myer merger puts us in the camp that Premier Investments retains the growth brands of Peter Alexander and Smiggle,” said MST Marquee senior analyst Craig Woolford in a note to clients.
“The risk of earnings downgrades and weaker sales trends in the second-half for Peter Alexander and Smiggle are likely to put some downward pressure on the share price near-term.”
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