Premier Investments is moving to reopen almost all its 900 stores from Friday onwards after a six-week shutdown, but all that news got yesterday was a bit of a ‘ho-hum’.
The shares ended at $15.41, down 0.6% on a day when the ASX dipped 1%.
That was, in fact, a good reception to the news that the closures saw massive falls in sales for the six weeks the stores were closed.
Investors also ignored the company again pointing to the challenging outlook for sales and earnings over the rest of the financial year to the end of July.
One other point emerged from Tuesday’s update and that was the strength of online sales (a common point with other retailers such as Myer and Mosaic Brands and Kathmandu) which Premier will no doubt use to restructure its store networks in coming months.
The company, which operates chains under brand names such as Smiggle, Just Jeans, and Peter Alexander, told investors yesterday in another trading update that it was beginning its recovery reopening phase after first shutting doors on March 26.
Stores in all states will be open again from the end of the week, excluding airport-based stores and some inner-city locations. Premier said that extensive social distancing and hygiene practices, including frequent disinfecting of communal areas, will be in place for the re-opening.
However, stores in the UK, Ireland, and Singapore will remain shut until June. Stores in Malaysia and Hong Kong have partially reopened.
Premier was one of the first major retailers to close its stores in the face of the coronavirus pandemic, joining hundreds of others such as Myer, Adairs, Uniqlo, and Mosaic.
Premier said in its update that total sales across the business slumped 74%, and in-store sales globally dropped 99% to near-zero.
However, online sales doubled over the period, however, with the company’s largest online brand Peter Alexander’s digital sales up 295%.
Premier said online sales alone at Peter Alexander for the week ending May 2 exceeded the total online and in-store sales made in the same week of 2019.
Digital sales at the company’s New Zealand operations for the nine days up to May 6 grew a massive 560%.
That success online plus the continuing tensions Premier has with landlords over rent could see changes in the structure of the various chains.
“The COVID-19 pandemic has significantly increased that existing trend and could hasten the substantial retail restructure already underway,” Premier said.
Some 70% of Premier’s store leases are in holdover or expire next year, providing the retailer with significant flexibility when assessing store closures.
Premier did not pay rents during the lockdown period and took a hardline stance with landlords which it believed were not acting in tenants’ best interests.
From Friday onwards and throughout the recovery period, Premier will pay rent at a gross percentage of store-based sales, with the retailer again putting the onus on landlords such as shopping centre owners to help get the economy running again.
“As part of this critical process, it is incumbent on those landlords to demonstrate and announce the actions they are taking to ensure a healthy and safe environment for our employees and customers to confidently return to shops,” Premier said.
Store operations will be “highly uncertain and unpredictable”, it warned, and the company warned it would have imbalanced inventory levels until potentially December.
Premier made no predictions for its earnings in the second half of its financial year ending July, warning sales and margins would be highly uncertain and dependent on consumers’ enthusiasm to return to shops.
“Given the uncertainty around the timing of the recovery, it is impossible to forecast the extent of the impact on second-half earnings until we have actualised the result,” Premier said.
