The one thing billionaire Solomon Lew and his struggling consumers have in common

Save articles for later

Add articles to your saved list and come back to them any time.

You would think that retail billionaire and former member of the Reserve Bank board Solomon Lew and the majority of Australians have little in common. But they are in violent agreement on one thing – the Reserve Bank shouldn’t lift interest rates next week.

Bizarrely, Lew and the average “battered and bruised” punter have quite a bit in common. They are his customers and when they are squeezed in a cost of living crisis, it hurts Lew’s retail business, Premier.

And profit is personal for Lew.

Solomon Lew says interest rates don’t need to rise again.Credit: Eamon Gallagher

While Premier Investments’ 2023 profit held up better than most discretionary retailers, not even Lew’s well-oiled business can escape the reality of the current economic backdrop.

Premier performed well on costs – even staff and property leasing, which have been managed down to the dime.

But the last quarter of the 2023 financial year and the early weeks of the current financial year showed sales had been hit. The company still managed to report a record full-year profit, but declined to give any guidance on what it expects for its current financial year that began in August.

Not even Lew’s well-oiled business can escape the reality of the current economic backdrop.

Official retail sales numbers released on Thursday from the Australian Bureau of Statistics showed that nominal sales grew by a tepid 0.2 per cent in July.

Thus Lew strangely has become something of a consumer advocate. He says the Reserve Bank hit consumers “too hard and too fast” over the past 18 months with too many successive rate rises that were difficult to digest.

“There is stress with utility prices, stress with food prices and with petrol prices … I don’t think the consumer can take this for very much longer.” He wants to see the government give back part of the $22 billion surplus it recently announced to “the needy”.

“I’m not sure whether the government really fully understands how tough it is out there,” Lew said.

That said, Lew has seen plenty of retail downturns dispute during which he has prospered over several decades. During that time, he has learnt a thing or two about squirrelling cash away for the leaner times. The Premier balance sheet is flush with cash.

It might be a leaner year ahead for discretionary retail, but Premier is not letting this spoil its international expansion plans for its marquee brands, Smiggle and Peter Alexander.

Premier announced its accelerator pedal was flat to the boards with the opening of 60 or more Smiggle stores in the Middle East – the first wave of which will be in Qatar and the UAE by the end of the year.

Premier also has big expansion plans for Peter Alexander. In November, the brand is set to launch with a cross-border e-commerce platform provider to expand the brand across 35 countries.

Smiggle plans to expand in the Middle East.Credit: Adam McLean

All this while working on a total restructure of his retail empire that is entertaining the prospect of four-way demerger. Under this scenario, Premier would retain cash, and its investments in Myer and small appliance maker Breville.

There is plenty of anticipation around what plans Lew has for Myer. I have previously argued that the near 30 per cent stake Premier has in the department store group affords Lew de facto control.

Courtesy of Premier’s circa 30 per cent investment in Myer, he now gets more say on who sits on the board and has the voting clout to successfully push for new board members.

Logically, this would happen at Myer’s annual meeting, which is set for early November, so all will be revealed in a couple of weeks when the company issues its notice of meeting to shareholders.

It will be the last annual general meeting under the leadership of John King who is scheduled to depart next year.

Or to quote Nat King Cole’s song, it could be that at Myer, “the party’s over”.

The Business Briefing newsletter delivers major stories, exclusive coverage and expert opinion. Sign up to get it every weekday morning.

Most Viewed in Business

From our partners

Source: Read Full Article