Brexit dents Smiggle’s (ASX:PMV) growth plans


“This once-in-a-lifetime event has just lurched from one political disaster to another,” Premier Investments chief executive Mark McInnes said.

Premier had previously said Smiggle was on track for annual sales of $450 million by June 2020, but on Friday pushed out that timeline by up to 2½ years as a “direct result” of Brexit.

Premier Investments chairman Solomon Lew and CEO Mark McInnes.Credit:Elke Meitzel

Mr McInnes said Smiggle was embarking on a new growth strategy for Europe, Asia, North America and the Middle East by wholesaling to large retailers and selling through online retailers like Amazon, rather than opening new Smiggle stores. That “capital light” strategy would deliver better earnings, he said.

Matt Williams, portfolio manager at Premier’s third-biggest shareholder, Airlie Funds Management, said the result was “very pleasing”, albeit with some surprises.

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“The composition was probably different than expected, with a slower Smiggle result well and truly offset by Peter Alexander and the other apparel brands outperforming expectations,” he said.

While Smiggle was probably reaching the end of its growth potential in Australia, Mr Williams said he backed the new offshore strategy, and thought the apparel brands could continue to do well despite the difficult market.

“As long as this management team remains in place running these brands, we remain comfortable,” he said.

Premier’s apparel brands together grew sales 7.5 per cent, compared to market-wide apparel sales in January of just 2.27 per cent, according to the Australian Bureau of Statistics.

It credited the retail basics of having on-trend products and good service for that result.

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But Premier’s chairman and controlling shareholder, Solomon Lew, said it had been hurt by other retailers’ heavy discounting, which cost Premier sales and forced it to discount too.

“If the market wouldn’t have been in the trouble that it is … we would have done a lot better,” he said. “Other players … put a lot of downward pressure into the marketplace.”

Premier said its online sales jumped 35 per cent to account for 12 per cent of all revenue.

Management, which has shut 101 stores over the past six years, again took a swipe at landlords who charged what they said were unrealistic rents despite falling foot traffic as shoppers shifted their spending online.

Premier’s net profit increased 13 per cent to a record $88.8 million for the six months to January 26, broadly in line with market expectations, on an 8 per cent rise in total sales to $680 million.

This once-in-a-lifetime event has just lurched from one political disaster to another.

Premier CEO Mark McInnes

The company announced a fully franked interim dividend of 33¢ a share, up 4¢ from the same period last year.

Shares in Premier, which has delivered total shareholder returns of 170 per cent over the past five years, compared to 55 per cent across the ASX200, fell 10¢ to $16.41 on Friday.

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