Premier Investments (ASX: PMV) appears to be punching its way through a volatile retail environment after reporting solid underlying profit growth on the back of $769 million in sales for the first half.
The company is also cracking down on landlords who won’t come the party with four store closures planned for Sydney’s CBD.
Premier Investments is forecasting EBIT of between $209.5 million and $211.5 million for its retail operations in the first half of FY22, which is up 4.2 per cent and 5.3 per cent respectively compared to a year ago. The profit growth comes on the back of a marginal 0.5 per cent increase in sales.
However, the global retailer has been buoyed by a 27 per cent increase in online sales to $195 million, which now represents about a quarter of the group’s total revenue.
The strong underlying performance for the 26 weeks ending 29 January – which does not include results from the company’s investment operations - is notable given that Premier’s stores were closed for more than 42,000 combined trading days due to lockdowns in various markets.
In response to the disruptions, Premier Investments has taken a hard line with landlords in areas where stores have been hardest hit.
As a result, Premier – which is chaired by retail king Solomon Lew - says it will close four stores in Mid-City Arcade in the Sydney CBD. These comprise Peter Alexander, Smiggle and Portmans, which will close in March, and Just Jeans, which will close no later than July next year.
“It is not the group’s objective to close any stores,” says Premier Investments CEO Richard Murray.
“However, store closures are necessary and inevitable when landlords do not accept this shift in consumer behaviour.
“These closures demonstrate the group’s previously announced intention to walk away from stores where landlords seek rents which are unrealistic and which do not reflect the market, particularly in those centres where customer foot traffic has been decimated by the pandemic.”
Murray notes that the ‘majority of landlords, large and small, have recognised the change in consumer shopping behaviour’ as well as the material impact of the pandemic on the retail market.
“As a result, over the past two years Premier has been able to reach mutual agreements with many landlords which address the trading impact of the COVID-19 pandemic, and which appropriately rebase rents for the future,” he says.
Premier Investments operates seven retail brands, which also include Portmans, Jay Jay, Jacqui E and Dotti.
Murray credits the first-half performance to ‘disciplined cost control’ amid challenging conditions.
“The group has weathered the numerous logistical challenges during the half through meticulous planning and by taking full advantage of Premier’s owned Australian Distribution Centre,” he says.
“Reviews of the group’s distribution centre capabilities in both Australia and New Zealand continue as part of a long-term strategy to meet ongoing demand as customers change their shopping behaviour in the wake of COVID-19.”
The standout performers for Premier Investments during the half year have been Smiggle, which has benefited from children returning to school, and strong results from the Peter Alexander and Portmans businesses.
Today’s announcement pushed Premier Investment shares more than 8 per cent higher in early trade.
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