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Lew sets Smiggle’s sights on mainland Europe

Just jeans just groupSolomon Lew’s Premier Investments has exceeded analyst forecasts, booking a 7.3 per cent increase in earnings, before interest and tax (EBIT) to $136 million, driven by continued strength in Smiggle as it eyes a broader European expansion.

Net profit after tax rose 1.2 per cent to $105.1 million, while total sales increased 5.7 per cent to $1.1 billion, driven by a 1.1 per cent increase in group like-for-like sales.

Citi analysts were forecasting a 3 per cent increase in EBIT to $130 million.

Fast-expanding stationary brand Smiggle was the jewel in Lew’s crown, with global sales increasing 28.8 per cent to $238.9 million, bolstering management’s optimism that the brand can generate $400 million annually by FY2020.

Lew is now preparing to test the retail concept in mainland Europe, after investing heavily in UK expansion in recent years with success. The Netherlands and Belgium will open first over CY18, with 40-50 stores slated to open over the next 4-5 years.

38 new Smiggle locations in the UK drove a 58 store global expansion for the brand during FY17, with plans to open another 100 – 120 new stores over the next two financial years.

“Premier Retail’s performance this year shows the robust nature of our business resulting from key investment decisions made over the past five years,” Premier chairman Solomon Lew said.

“The 2011 strategy of allocating resources to our unique growth brands, developing a world class online platform with a best in-market logistics capability and rejuvenating the core brand propositions have allowed Premier Retail to keep growing profits year on year.”

Smiggle’s progress is offsetting the impact of Premier’s struggling apparel portfolio, which was impacted by macro-conditions and intensifying promotional activity in the market through FY17.

Jacqui.E’s sales declined 6.2 per cent to $65.7 million (citi forecast -4 per cent), while Portmans slid 8.6 per cent to $111.5 million (citi forecast -4.6 per cent) – although Premier said initial FY18 trading had returned to positive LFLs.

Dotti declined 3.6 per cent to $110.4 million and Jay Jays sales sank 1.6 per cent to $158.9 million.

Peter Alexander brought home growth though, with pyjama sales up 14 per cent to $190.9 million, leaving management confident that the brand can generate $250 million annually by FY2020.

To achieve its target Premier intends to open 40 new PA stores over the next three financial years, refurbish twelve by 2020 and extend the brand into bath & body products.

Just Jeans also grew slightly, with sales up 1.5 per cent to $216.4 million despite three store closures through the year as part of Premier’s ongoing store consolidation program, which also saw three Jay Jays stores close.

Premier said one-off temporary store closures impacted Portmans, Jacquie E and Dotti, but that online sales growth remains a highlight, growing by 44.3 per cent to $68.1 million.

“We are relentlessly focussed on implementing our strategies – investing in expanding Smiggle globally, growing Peter Alexander significantly and delivering a world class online experience for our customers while achieving ongoing cost efficiencies and continuing to invest in our core apparel businesses,” Premier CEO Mark McInnes said.

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