Where to next for Solomon Lew and Premier Investments? Does it still have the upper hand on Myer?

Premier Investments (ASX:PMV) is one of those companies synonymous with its boss and this company’s leader is Solomon Lew. Premier is an investment company that owns the Just Group, which owns half a dozen retail brands including Smiggle, Peter Alexander, Just Jeans, Jay Jays, Portmans, Jacqui E and Dotti. Premier also has a 25%+ stake in Breville, not to mention a stake in Myer which currently sits at just over 30%. Premier has been listed since 1987 and Lew has had on and off involvement over the years, with his current stint at the top beginning in 2008.

Now let’s talk about Solomon Lew. He was born in Australia to Jewish refugees from Poland – his father died when he was only 12 years old. Lew has had a career in the retail space spanning over 6 decades and is worth nearly $4bn. He was the first Australian to be inducted into the World Retail Hall of Fame, once served as a Board Member on the RBA as well as a director of Coles Myer. He has had more ups than downs, although there have been some downs including failed attempt to buy Ansett after it collapsed and he suffered the indignity of being removed from the board of Coles Myer in 2002. But let’s turn to the present.

Premier Investments’ current state

Premier Investments’ unaudited results from FY24 (the 12 months to July 27) include $1.6bn in sales and EBIT of $341m post AASB 16 and $326m pre-AASB 16. AASB 16 is an accounting standard setting out the principals for how leases are recorded and reported. Either way, the profit figure is down from the $357m in the year before, while revenues would be down from $1.64bn the year before. Still, the overall sales would be over 25% ahead of pre-pandemic levels , and online sales are naturally ahead of pre-pandemic levels.

But it is what may unfold in the near future that is occupying investor’ minds. You see, the reason why Premier Investments’ unaudited results were released only a few days prior to the day they were meant to be unfurled to shareholders is because sales data fro some individual brands Premier Investments was trying to sell to Myer were not doing so well. This data leak has not stopped Myer from halting due diligence. We’ve seen all too often that companies doing due diligence on potential acquisitions have no hesitation to publicly walk away if they see something they do not like. Another piece of bad news was the termination of Smiggle boss John Cheston for non-specific ‘serious misconduct’. He was already going to leave as he had been hired to CEO Lovisa from next year and was serving out his notice period, but given his marching orders earlier this week.

Premier Investments has wanted to spin off Smiggle and Peter Alexander into their own companies. This is not just speculation, the company hired investment banks to look into a potential deal. But as we saw with Virgin Australia’s botched IPO ambitions, it all depends on the appetite of the market.

Myer holds the upper hand over Premier Investments

There has long been speculation that Premier may want to take over Myer, or collaborate more closely – perhaps merger the companies’ womenswear and youth brands. That’s just the way it goes when you are such a large shareholder, especially when you buy more shares.

Turning to Myer, this is the first time in quite a while that Myer appears to have an upper hand over its largest shareholder. Myer’s chairwoman is former Qantas Loyalty executive Olivia Wirth who built up the Frequent Flyer business to be a bigger moneyspinner than the airline, only to be passed over as Alan Joyce’s successor. While Myer is a shadow of its former self (i.e. the $4bn company it was in 2009), things look rosy for the first time in a while.

Things are far from perfect, but the company slightly grew its comparable store sales in FY24. Actual sales were down 3%, reflecting store closures. It now makes over 20% of its sales online, and boasts 10.4m loyalty members (706,000 of which joined in FY24 and over 50% of those new members are under 35). Myer publicly told its investors last week that it was ‘exploring [a] potential combination with Premier Investments’.

Source: Company

Conclusion

We’ll be watching what happens with keen interests. At this point in time, the only thing that can be said with certainty is that Myer holds an upper hand over Premier in a way it has not in many years. Premier is still a larger company, at $5.5bn, while Myer is only $649.2m. But it doesn’t look that way right now.

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