lts in the past two years were bolstered by Covid management strategies, including landlord rent concessions and government JobKeeper payments. However, the 2022 performance was much “cleaner”, with sales over the pre-Covid 2019 financial year 17.8 per cent higher and net earnings up by an impressive 167 per cent. An ongoing program of closing stores that did not meet required metrics has been offset by a 14.3 per cent increase in online sales which now account for 22 per cent of the retailer’s total sales. Significantly, the first seven weeks of the new 2023 financial year are currently up by 46.7 per cent against the tail end of the Covid disruptions last year. With the tills ringing, Premier Retail will reward shareholders with a special dividend next January. Announcements of the dividend and a proposed $50 million share buyback have already seen the retailer’s share price and enterprise value jump markedly. Good management no doubt but also quite likely a strategic move to position Premier Retail for further acquisition opportunities. Merger speculation remains Market speculation has for months focused on Solomon Lew launching a takeover for Myer and, inevitably, a potential merger with David Jones. Lew’s supposedly last word on the proposition is that a merger of the two department store chains “doesn’t make sense”. However, that pronouncement may not be the last word on a merger by the billionaire who has dealt himself into any future deals that might involve Myer and David Jones. Woolworths Holdings, the publicly listed South African retailer that acquired David Jones for $2.1 billion in 2014, confirmed last month that it was actively considering an exit from the Australian department store chain. Lew has history with Woolworths Holdings and there is no love lost between the two parties from a protracted battle of wills on the direction of the Country Road business and a raid on David Jones shares that disrupted Woolworths’ takeover bid. Lew extracted a premium price to finally exit his minority shareholding in Country Road and forced Woolworths Holdings to pay over the odds for David Jones. Lew has obviously been keeping tabs on the David Jones situation as several potential suitors have shown interest, including private equity firms and reportedly mining mogul Andrew ‘Twiggy’ Forrest. It is understood Lew himself has had talks about David Jones. Improved performance Lew has not explained why a merger of David Jones and Myer would not make sense, but that might well have more to do with the price Woolworths Holdings would put on the business than actual operational factors. The South African company has suffered a lot of pain from its shareholders over the losses incurred on the David Jones acquisition and it would not want to be accused of a firesale exit. David Jones and Myer have both improved their performance in relative terms post-Covid, but they remain well below their peak enterprise values. While Myer was bullish about its FY22 results, sales are still flat at the pre-Covid 2019 level of around $2.9 billion. Earnings are more than double the 2019 result at $48 million, largely courtesy of the retailer’s move to reduce floor space and close stores, which has had a flow-on effect on inventory levels, staffing and other operating costs. David Jones is performing marginally better than Myer, but is still well below its peak and its earnings are also reliant on reduced operating costs more than sales growth. Most, if not all, retail analysts and institutional investors believe a merger of the two department store chains is crucial to the survival of the brands, let alone sales and earnings growth. Lew is at odds with the prevailing view and remains critical of the current Myer board and management despite steadily increasing his stake in the department store group. Lew, a former chairman of Myer, famously acquired a 10.77 stake in the retailer in March 2017 for $101 million only to see the share price collapse within weeks. Using creep provisions in Australian Securities Exchange rules that allow him to increase his shareholding without launching a takeover bid, Lew has now lifted his stake to almost 23 per cent. While subsequent purchases of shares since 2017 have been at a much lower cost, the current value of Lew’s initial 10.77 shareholding is around half the acquisition cost. Well placed to have the last word Lew has not exactly profited from his investment in respect of dividends over the period either, with Myer offering a meagre 5 cents a share in FY17 and 4 cents for the full FY22. Lew has kept everyone guessing with his progressive shareholding build, with some pundits expecting a takeover offer. However, if a takeover of Myer as a standalone play was the objective, the opportunity would have made more sense when the share price was less than half its current quote. Whatever the strategy of a cashed-up Lew and Premier Retail, there is no doubt that Lew has yet again positioned himself to be kingmaker or spoiler of any possible merger of Myer and David Jones. Much to the chagrin of Woolworths Holdings, no doubt, Lew is potentially in a position to frustrate their exit options. Yet again, Lew is well placed to have the last word and to generate an outcome that – for him – certainly does make sense.