Clouds loom over the pyjama party

Funky sleepwear and stationery have been big winners for Solomon Lew, but tougher times may lie ahead

- RAYMOND JANG

The Premier Investments’ chairman and 45% shareholder, Solomon Lew, is often labelled Australia’s “retail king”. A more fitting title is “retail investment king”. In the early stages of the GFC, Lew was greedy when others were fearful, in the words of Warren Buffett. In 2008, Premier acquired Just Group, the owner of a range of Australian clothing brands. Net profits have almost quadrupled since then, although future growth in the casual and womenswear categories will be modest.

Lew, ever the opportunist, forged a strategy to prevent Premier from being categorised as a low-growth, low-margin retailer. In 2017, he purchased a 10.8% stake in Myer and was also one of the earliest investors in Breville.

We’re going to focus on the brands where much of the company’s intrinsic value lies: the rapidly growing lifestyle retailers Peter Alexander and Smiggle.

As with other retailers, Premier’s share price has been punished, down substantially in the past six months. There is a whiff of opportunity if the company can continue to build on the success of its growing brands.

Know your customer

In the past 15 years, Smiggle has increased revenue 13-fold while Peter Alexander has increased it eight-fold. Both have become established brands with pricing power and margins to match. It is worth understanding why.

Aristotle said: “Knowing yourself is the beginning of all wisdom.” In branding, wisdom begins with knowing the customer, perhaps before the customer even knows themselves.