Retail group Premier Investments has reported a 20% slide in full-year net profit for the year to July, thanks to impairment losses in one of its older clothing chains but that didn’t stop Solomon Lew’s key listed company from outlining a new ambitious expansion plan for its boom Smiggle chain.
And Premier said the 2018-19 financial year had started well with global sales for the first five weeks of the new year up 10.2% with improved gross margins.
“Pleasingly this includes Smiggle sales in the UK and Republic of Ireland that were up 29% during the first five weeks, which represent the key “back to school” sales period in these markets,” directors said.
Despite that final dividend and the full year payout was set at record levels. The final was boosted 6 cents a share to 33 cents and the total for the year was boosted 17% or 9 cents a share to a high of 62 cents.
That should keep shareholders happy, led by Mr. Lew who owns 43% of Premier.
Premier and Mr. Lew have been in the news in recent months more for the who losing investment in the struggling Myer department store chain. But that did not have an impact in the year to July 28 even though it was worth around $40 million at the July 28 balance date compared to the purchase cost of around $115 million.
Myer shares have since risen strongly, but Premier’s investment is still in the red.
The impairment of some of the intangibles in its Just Group clothing chains reduced statutory net profit to $83.6 million for 2018, compared to $105 million for 2016-17.
The value of brands in its Just Group – including Just Group and Jay Jays – was impaired by $30 million due to “the increasingly competitive retail landscape and structural changes impacting the apparel industry”, Premier said in yesterday’s report.
Without that write-down and other one-offs, underlying net profit rose 9% to $160 million, off the back of an 8% rise in group sales to $1.18 billion.
Much of that growth came in Premier’s Smiggle chain of children’s stationary stores, with sales jumping 2%t to $293 million as it opened 84 new stores, bringing it to a global network of 396.
The performance of Premier’s women’s clothing (pajamas, sleepwear and the like) brand Peter Alexander’s was almost as strong as Smiggle – sales jumped 14.5% to $218 million. That chain opened 21 new stores during the year.
It’s no wonder Premier announced it was launching a major strategic growth plan for Smiggle with the aim of growing sales to $450 million by 2020 through online sales, department store concession outlets, and a new wholesale channel for its products. Premier said yesterday it also sees Peter Alexander’s sales jumping to $250 million by 2020, as outlined in the current corporate plan.
But a number of Premier’s older fashion brands struggled to grow, with Just Jeans’ sales falling 1.7%, Jay Jay’s by 0.5% and Dotti by 3.6 percent.
Portmans though saw an 11% rise in sales in 2017-18 even as it closed some stores, and Jacqui E grew sales by 5%.
The group’s like-for-like sales, which removes the impact of opening and closing stores, rose 3.3% – ahead of 1.1% growth recorded last year.
“We have seen significant growth of our unique brands Smiggle and Peter Alexander which benefit from in-house design, research, and constant innovation,” Premier CEO Mark McInnes said in yesterday’s statement.
“We will continue to invest in these businesses and grow them aggressively,” he said.
Premier remains well resourced. It said yesterday it had free cash on hand of $178.6 million. Besides the investment in Myer valued at $40.6 million (which is now up to around $50 million) it has its equity accounted investment in Breville Group Limited at $223.2 million. The market value of Premier’s holding in Breville was $472.1 million at 17 September 2018 (Monday of this week).
Premier shares fell 2.3% to $19. They are up more than 25% so far in 2018.
