Lew's Premier Investments leaves Myer in shade

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This was published 9 years ago

Lew's Premier Investments leaves Myer in shade

By Sue Mitchell

Solomon Lew's Premier Investments has left larger rival Myer in the shade, reporting double-digit profit growth from its retail operations as stronger sales and falling costs offset gross margin pressures.

Premier Retail's underlying earnings before interest and tax rose 10.9 per cent to $92.8 million in the 12 months ended July 26, underpinned by total sales growth of 6.2 per cent to $888.5 million and like-for-like sales growth of 4.7 per cent.

Solomon Lew recently sold his $212 million stake in David Jones and his $209 million stake in Country Road to South African retailer Woolworths, banking profits of $191 million.

Solomon Lew recently sold his $212 million stake in David Jones and his $209 million stake in Country Road to South African retailer Woolworths, banking profits of $191 million.Credit: Josh Robenstone

In comparison, Myer's full-year sales were flat, same-store sales rose 1.2 per cent and earnings before interest and tax fell 25 per cent.

Mr Lew, Premier's major shareholder, recently sold his $212 million stake in David Jones and his $209 million stake in Country Road to South African retailer Woolworths, banking profits of $191 million. There has been speculation Mr Lew will pool his cash with Premier's $313 million cash on hand and make a bid for Myer.

Mr Lew has said in the past that Premier, which also owns a $265 million stake in appliance maker Breville, could afford to make a $2 billion acquisition by raising new capital.

Premier Investments' group net profit rose 5.3 per cent to $73 million, from $69.3 million previously, excluding a one-off non-cash gain of $105.2 million in 2013 from the reclassification of its stake in appliance maker Breville.

The group net result would have been higher if not for one-off cash costs of $7.6 million from a new distribution centre and costs associated with the entry of Smiggle into the UK market in February.

Group net profit fell short of consensus forecasts of about $78.5 million, while earnings before interest and tax from the Just Group retail operations were slightly ahead of forecasts around $90 million.

Premier Retail chief executive Mark McInnes said he was pleased with the progress against the group's six-point transformation plan, which includes rejuvenating core brands, boosting gross margins through better sourcing, supply chain simplification, online expansion and growing the Smiggle and Peter Alexander brands.

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While gross margins slipped 25 basis points to 62.1 per cent, Premier's cost of doing business fell 38 points, despite rising rental and labour expenses. As a result, EBIT margins rose from 10 per cent to 10.4 per cent.

All seven brands in Premier Investments' retail stable – Just Jeans, Dotti, Portmans, Smiggle, Peter Alexander, Jacqui E and Jay Jays – delivered like-for-like sales growth in the second half. This represents a big improvement from several years ago, when only half the brands were in growth.

The stand-out performer was Peter Alexander, which is now run by former Myer executive Judy Coomber. Sales grew 21.4 per cent to $122.2 million, with 17 new stores, including nine concessions at Myer, augmenting like for like sales growth in-store and online. Premier plans to open between 8 and 15 new stores in 2015 and 2016, including six before Christmas this year.

Another highlight was Smiggle, where sales rose 17.4 per cent to $105.2 million as 14 new stores augmented strong same-store sales growth. Smiggle now has eight stores in the UK and 18 in Singapore. It plans to open another 10 in Britain before Christmas, with long terms plans for as many as 200 outlets in the UK market within five years.

Sales at Premier's largest brand, Just Jeans, rose 5.4 per cent to $206.9 million, despite the closure of a net three stores, with double-digit growth in womens denim and 28 per cent growth in online sales boosting total revenues. Just Jeans is working on a new store format which is due to be launched this year.

Sales at Portmans rose 3.9 per cent to $112.1 million, with online sales up 39 per cent, and Dotti's sales rose 3.1 per cent to $111.7 million, with online sales rising 61 per cent.

Jay Jays sales fell 3.5 per cent to $161.4 million as eight loss-making stores were closed, but same-store sales and margins improved in the second half.

Premier increased its final dividend 1¢ to 20¢ a share, taking the full year payout to 40¢ a share, up from 38¢ in 2013.

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