Despite weathering a string of global crises, including Brexit in the UK, protests in Hong Kong and bushfires in Australia, to post record sales and earnings in the first half of FY20, Premier Investments said the coronavirus pandemic is now impacting trade across every brand in its portfolio.
On Friday, the owner of major national and international retail brands, including Smiggle, Peter Alexander, Just Jeans, Portmans, Dotti, Jacqui E, Jay Jays and Breville, reported a 7.6 per cent increase in first-half sales year on year, to $732.1 million, and a 10.7 per cent increase in earnings before interest and tax, to $126.1 million. The group declared a record interim dividend of 34 cents per share.
But the strong performance may be cold comfort, as the coronavirus outbreak and strict self-isolation measures introduced to contain the spread in certain markets have already seriously impacted Premier’s trade in the second half.
Smiggle sales have “deteriorated significantly” in the UK and Ireland and trade has been “severely disrupted” in Hong Kong, Singapore and Malaysia, the company said in a statement to the ASX.
Trade in all brands in Australia and New Zealand has been impacted, and the company warned gross margin could be affected as it moves to clear inventory in each market.
Premier CEO Mark McInnes declined to provide specifics on changes in sales or foot traffic, saying on a media call that the company was not “in control of what’s happening on a daily basis” and “merely responding” to the crisis at hand.
He described the current situation as “unprecedented” and unlike anything he has experienced, including the Global Financial Crisis in 2008 and recession in 1991.
He also warned there could be widespread store closures if landlords do not start supporting their tenants by renegotiating rents.
“Since the outbreak of COVID-19, we have closed two stores in Hong Kong, and we are prepared to close many more stores globally if landlords do not respond to the current crisis,” McInnes said.
While he noted that Premier could exit 70 per cent of its leases in Australia and New Zealand with just 30 days’ notice, he said it wasn’t about “profiteering”, but rather “sharing the reality”.
“Historical rents are just…all we’re pointing out to landlords [is the reality of the situation],” he said.
In terms of inventory, Premier has secured the majority of the balance of its second-half inventory with only minor increases in supply chain costs.
It closed the first half with $101.6 million in debt and $199.8 million cash on hand.