While its competitors bemoaned a harsh retail market, Premier Investments (ASX: PMV) went on to deliver a record first-half net profit before tax of $110.5 million.
The group's after tax profit hit $78.6 million, up 9.4 per cent on the same time last year, and earnings were up 10.2 per cent to $102.5 million.
Chairman Solomon Lew says the strong result is a significant milestone for the company.
"Premier Investments has again delivered a very strong result," says Lew.
"Premier Retail today announced an underlying first half EBIT of $102.5 million. This is the first time the business has achieved an underlying EBIT above $100 million for a half."
The company, which owns a suite of popular Australian retail stores including Peter Alexander, Portmans, Jacqui E and Smiggle, recorded total sales up seven per cent at $630.1 million.
Lew says his team recognised the challenges presented by the market, but was well equipped to deal with them in kind.
"This outstanding achievement once again demonstrates the ability of Premier's board and executives to both set a strategy and rigorously implement that strategy to deliver superior returns to shareholders despite operating in a challenging market," says Lew.
The results also demonstrated how Premier'sinvestment into retail department store chain Myer has gone sour. Since the groups $101.3 million investment in Myer a year ago the investment has dropped in value to now be worth $54.8 million.
Premier Retail CEO Mark McInnes says the company beat the odds by investing in its more exciting brands.
"We are relentlessly focused on implementing our strategy," says McInnes.
"We identified in 2011 that Smiggle and Peter Alexander were unique brands with personalities driven by inhouse design, research and innovation. We set out to invest in these businesses and grow them aggressively."
"We also identified online as an essential and complementary channel for our brands. Again, we invested, not only in customer online experience, but also in a national distribution fulfilment centre and supply chain infrastructure to maximise returns."
Smiggle's global sales for the half were up 26.7 per cent to $170.7 million. At the end of the half Smiggle had 332 stores across Australia, New Zealand, Singapore, England, Scotland, Wales, Northern Ireland, Malaysia, Hong Kong, and the Republic of Ireland.
Peter Alexander, the group's sleepwear store, achieved sales growth of 15 per cent to $114.4 million during the half.
Over the past five years Premier Retail has opened 260 new profitable Smiggle and Peter Alexander stores (190 of these outside of Australia) but Premier Retail has also closed 82 stores over that time including ten during 1H18 as part of the ongoing program to close unprofitable stores.
The closures during 1H18 included Just Jeans and Portmans Melbourne Flagship stores in the Bourke Street Mall. These two stores had been trading for over 30 years and combined generated over $5 million in annual sales in FY17. Premier Retail closed these stores as a direct result of unrealistic rent expectations. As consumers continue to increase their shopping online, Premier Retail will continue to focus on store profitability to drive appropriate investment and shareholder returns.
During the half, the group recorded total online sales growth of 71.2 per cent to $56 million. The group anticipates its 2020 online target of $100 million in annual sales will now be achieved in 2018, two years ahead of expectations.
Lew says the online channel will become increasingly more relevant for the retailer as more shoppers choose it over physical stores.
"Customers are choosing which channels and locations they want to shop in, and everyone in the Premier Retail team respects and embraces the customers' choice," says Lew.
"Landlords need to also embrace and respect the changes in consumer behaviour and channel choices customers are making. As we have said before, where landlords do not continue to invest in overall shopping experiences and/or adjust their rent expectations in line with the performance of their own centres and the major shift in consumer behaviour, further store closures will be necessary."
Premier Retail was extremely disappointed in Dotti's performance and believes it can do much better. David Bull has resigned from Premier and Judy Coomber has been appointed Managing Director of both Peter Alexander and Dotti.
These results come in stark contrast to a depressed Myer (ASX: MYR), which Solomon Lew's Premier Investments has a 10.77 per cent stake in.
Lew has been applying significant pressure lately to the board of Myer, saying the department store has lost direction and needs a major reshuffle to recover.
The recent success of Premier Investments represents a serious wake up call for the embattled Myer.
Shares in Premier Investments are up 5.14 per cent to $15.13 per share at 10.15am AEDT.
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