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Lew Lays Into Myer
BY GLENN DYER - 27/09/2017 | VIEW MORE ARTICLES BY GLENN DYER

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PMV - PREMIER INVESTMENTS LIMITED
MYR - MYER HOLDINGS LIMITED


The one thing you can say with certainty about Solomon Lew is that if he is losing money on a deal, or perceives someone else is getting an advantage not available to him, he will complain to the sympathetic ears in the business media.

But when he’s making money, he goes quiet. Just take two issues that have annoyed him in the past few years.

He and Gerry Harvey were the biggest moaners about the unfair competition of consumers daring to buy what they liked from offshore websites (such as Amazon).

We have had two fruitless inquiries as a result, along with a Senate inquiry and now with the Productivity Commission inquiry that will find that it is too expensive to recover tax (GST), especially on imports of software and other technologies via downloading.

Lew though has gone all quiet on that issue (and Gerry Harvey is more preoccupied with queries about his accounts). On Monday in the 2016-17 annual results from Premier, we found out why - Premier’s has its online retail offer up and humming.

For the year to July Premier said its online sales jumped 44.3% to $68.1 million and it now expects to reach its target of $100 million a year of online sales by 2020 before then (2018-19). It is a good news story.

In Premier’s interim report in February, Premier explained the attraction of online sales: "Online is a profitable channel for Premier with EBIT margin significantly higher than the group average. Premier will continue to invest in further enhancing its world class online platforms in order to reach $100 million in annual online sales by 2020.”

In other words its more profitable to sell the same goods via his growing online business than at a standalone bricks and mortar or mall based outlet. And then there is his latest moan about department store Myer’s weak results.

Lew was disparaging - describing Myer’s offerings as stuff “the Salvation Army wouldn’t take in” and claiming the retailer was a basket case. Once again its money and nothing else talking for Lew.

He bought just over 10% of Myer at $1.14 a share, which have lost 37% of their value since his purchase in March (which saw the shares jump to $1.26 immediately after Lew’s purchase was identified). He has done $40 million.

He made the mistake, no one, especially Myer, forced Lew to buy the shares at that or any other time. It was his mistake, not Myer's.

But as we pointed out yesterday if you look closely at Premier’s 2016-17 result you find that the key retailing measure - same store sales - (that is, sales growth compared year to year or quarter to quarter on the same number of stores to take out the usually positive impact of opening more sores on sales growth). At the half year they were up a reasonable 2.1%, but by July 31 they had slumped to just 1.1% growth.

And overall sales were up 3.98% in the year to $1.1 billion, almost half the first six months growth of 7.1%. And underlying earnings before interest and tax rose 7.3%, down from a rise of 10.6% in the first half. It was a weak second half (and strangely no warning of that unlike the first half where Premier issued an update in early February and before releasing the results several weeks later)

From the sales and profit figures it is clear that had not been for the strong growth here and offshore of the Smiggle and Peter Alexander chains, Premier’s overall sales and profits would have fallen or shown little or no growth.

Followers of Premier and Mr Lew should ignore what he says about Myer and online competition and concentrate on what he is doing and where he is investing - in Smiggle here and offshore, with a saver on expanding Peter Alexander. He is not investing in his existing chains. The core offerings from Smiggle and Peter Alexander will be hard to buy from Amazon and online rivals - they are can only be obtained from the websites of the Premier brands.

That’s strong protection against Amazon, as Premier reported with the surge in online sales in 2016-17. That should be one metric (along with same store sales and EBIT) that investors should continue to monitor, not Mr Lew’s moans about Myer.

Premier is not doing bad at all, the lift in the interim and final dividends tell us the board expects the company has all the cash it needs, and it has a couple of hundred million dollars tucked away in a stake in Breville Group for a rainy day.

After falling 2.5% on Monday Premier shares fell more than 4% yesterday to end at $12.83, a near 3 month low, but still well above the 2017 low of $12.01 in late May.



View More Articles By Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

At the AFR he was a finance writer, Finance Editor, News Editor and Chief of Staff. At the Nine Network he was supervising producer of Business Sunday for more than 16 years. He has also written for other online and analogue print publications here and overseas.



 

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