This article is from the Australian Property Journal archive
SOLOMON Lew’s Premier Investments will reopen 900 stores across Australia and said it will pay rent in arrears for all stores at a gross percentage of sales.
Since Premier shuttered its stores in late March and it would not pay rent for the duration of the shutdown.
Premier’s chairman Solomon Lew said yesterday welcomed the relaxation of restrictions and congratulated the government over its handling of the covid-19 pandemic.
The retail giant yesterday revealed the shutdown has significantly impacted its global sales, with total sales down 74% for the six weeks to 6 May 2020 compared to the prior year comparable period. In total, its global retail store network sales were down 99%. However, online sales have surged by 99%.
“Since the beginning of the temporary store closures, online sales in Australia have surged.
Premier’s largest online brand in Australia, Peter Alexander, has consistently broken its own weekly records during this period, with online sales up 295%. Incredibly, during the week ended 2 May 2020, Peter Alexander Australia’s online sales alone were up 18% on last year’s total sales across both online and our entire 122 store and concession network in Australia.
“The online business has a significantly higher EBIT margin than the group average,” he added. “Prior to the global health crisis, customers were already increasingly electing to shop online. The COVID-19 pandemic has significantly increased that existing trend and could hasten the substantial retail restructure already underway.
“Premier is best placed to take advantage of this restructure as a result of its investments in creating a world class online platform and its fully owned Australian distribution centre together with the flexibility provided by its current lease profile — with 70% of its stores in Australia and New Zealand either in hold over or expiring in 2020,”
Lew said since the start of the global health crisis, Premier has acted decisively and prudently and these actions have allowed the company to maintain its strong balance sheet and position it for the store re-opening and recovery phase.
In line with Step 1 of the government’s “3 Step Framework for a COVIDSafe Australia”, Premier will reopen its stores from Friday, 15 May, with sites in New South Wales, Victoria, Western Australia, South Australia, Australian Capital Territory and Tasmania to reopen (excluding airports and some CBD stores).
Premier has already reopened all of its Queensland and Northern Territory stores (except airports and some CBD stores) on Thursday 7 May.
In terms of rent, Lew said during the period of the forced closures, due to government directions including stay at home orders, Premier paid no rent globally.
But during this phase of re-opening and recovery, Premier intends to pay rent in arrears for all stores at a gross percentage of sales. In Australia and New Zealand, close to 70% stores are either in holdover or with leases expiring in 2020.
“Given the severe economic disruption caused by the COVID-19 pandemic and the understandable level of public concern which will exist for some time, the customer response and trading activity during the next phase of our recovery and store re-opening remains highly uncertain and unpredictable. In addition, inventory levels and product assortments will be imbalanced until potentially December 2020.
“Premier looks forward to working with shopping centre landlords to help bring the economy back to life. As part of this critical process, it is incumbent on those landlords to demonstrate and announce the actions they are taking to ensure a healthy and safe environment for our employees and customers to confidently return to shops,” Lew said.
“As at 1 May 2020, Premier’s consolidated cash position was $256.2 million and maintains access to undrawn facilities of $91.8 million, which leaves the group well placed to begin the recovery, including progressively bringing back our workforce to reopen. This strength is no accident and is a function of our long-standing successful strategies that ensure we are in the strongest possible position to answer all the challenges of the global health and economic crisis,”
Lew said given the uncertainty around the timing of the recovery, it is impossible to forecast the extent of the impact on 2H20 earnings.
“No one can reliably predict the pace and timing of the upcoming phase of economic recovery. In this recovery period, Premier Retail’s sales and margin by store, by country, by brand and by region are highly uncertain and will be dictated predominately by the manner in which consumers respond to the return of instore shopping in their local communities, bound by strict social distancing rules and health guidelines,” he said.