The Solomon Lew-controlled Premier Investments yesterday attempted to argue that it sees a significant improvement for its retail businesses, Just Group in the coming year, despite warning of no improvement in earnings for the 2010 year and a larger than expected loss for one brand.
Premier told the ASX that it expects Just Group to earn an annual net profit of between $78 million and $81 million.
Just Group business includes brands such as Just Jeans, Jay Jays, Portmans, Jacqui E, Peter Alexander, Dotti and Smiggle.
Premier said its earnings before interest, tax and appreciation (EBITA) would be between $82 million and $86 million (including dividends from Breville Group), with the net profit from Just Group in the range of $78 million to $81 million.
That was on sales for Just Group just 3% higher at around $870 million.
In the 17 page trading update and presentation issued yesterday, Premier said the second half of the year to July 31 had been extremely challenging due to volatile retail trading.
"Successive interest rate rises have had a clear adverse impact on consumer confidence and discretionary spending.
"In combination with the macro-economic challenges, the second half has been impacted by the cycling of the Australian Government economic stimulus and sustained abnormal weather conditions in each of Just Group’s major markets.
"These factors have resulted in intensive industry-wide discounting.
"Given the environment, Just Group management continued to focus on achieving sustainable cost savings.
"However, these measures have not been sufficient to offset the lower sales and gross margins across some brands in this financial year."
"It should be noted that if the Portmans result was excluded from Just Group’s FY2010 and FY2009 EBITAs, the estimated final result would be broadly in line with the FY2009 EBITA. This represents a credible result for the other group brands in a challenging retail environment."
The women’s wear chain Portmans was a disaster and will report a loss of around $18.5 million.
Premier said the chain had been expected to post its worst result in the first half of the year, but the disappointing summer and the challenging retail environment saw a smaller rebound in the second half than was expected.
So the overhaul of the chain continues.
"A decision has been made to exit 15-20 marginal stores that are due for renewal and the remaining stores will continue to benefit from improved ranges, improved visual merchandising, a better in-store experience and, over time, increased customer communication," Premier said in the statement yesterday.
Initial turnaround plans had been, in retrospect, too extreme for Portmans’ customer base, Premier said, and those moves have been reversed and improved.
"Premier is confident that management now has a clear understanding of what needs to be done," it said.
Looking to the current financial year, Premier forecast EBITA between $100 million and $110 million in the 2010-11 financial year, with Just Group positioned for a significantly improved performance.
"The directors anticipate a challenging Q1, with continuing improvement in Q2 and significant improvement in the second half as the business cycles the abnormal retail environment of 2H FY2010," the company said in a statement.
The forecast performance would be driven by an improved retail environment, significant operating leverage in Just Group, a more supportive gross margin environment and continued cost management, Premier said.
Premier said it would declare a fully franked final dividend of 18c per share, in line with the previous year.
Premier also paid an interim of 18c a share for the first half of 2010, but added a 20c a share special payment, making 38c in total.
It paid a 20c a share special payment for the final in 2009 on top of the 18c ordinary payment.
No word on that yesterday, but buried in the statement was this tanatalising statement:
"In addition, Premier Investments continues to explore value enhancing opportunities which may offer additional upside to Premier shareholders.
"Premier has strong cash reserves to enable it to capitalise on opportunities as they arise."
No further explanation was forthcoming, but the shares still closed down for the day.
The shares fell 10c to $6.28, a fall of 1.5% on a day when the overall market was up 1%.
