What Solomon Lew did after sales plummeted 74%

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6one5 Retail Consulting Group CEO Bill Rooney argues Solomon Lew’s Premier Investments is leading the way in rent negotiations.

Premier Investments, after a six-week shutdown that had seen global sales decline 74%, faced a conundrum.

With 12-18 months of uncertainty ahead, it announced it had no alternative but to renegotiate with landlords a % rent deal.

In its Australian Stock Exchange announcement, dated May 12, Premier advised:

"Given the severe economic disruption caused by COVIS-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 assortment will be imbalanced until potentially December 2020. During this phase of re-opening and recovery, Premier Retail intends to pay rent in arrears for all stores at a gross percentage of sales.”

Premier Retail operates 1,154 stores and concessions in 11 countries, with gross revenue of $1.271billion.

Case study: Predictions for Premier Retail for 12 months to June 2021

I have forecast Premier Retail’s results for the next 12 months to June 2021, based on its stated position on paying a % rent and our forecasted sales and margin assumptions.

While the profit and loss show a dramatic decline, the business remains profitable with an ability to grow once COVID-19 is behind it.

The highlights are:

▪ A decline in profi from $168m to $87m (48%)
▪ Sales decline from $1.271m to $903m (29%)
▪ Rent decline from $228m to $144m (37%)
▪ Wages: I have assumed wages can be maintained at 22.3% of sales which I think is doubtful due to how tightly wages are managed instore at the moment. Therefore, I predict EBIT projections are at the higher end of forecasts.

I have included a proforma P&L forecast for Premier Retail, following for the 12 months to June 2021 with 2019 comparisons.

Implication for other retailers 

As I have recommended in recent posts the only fair way for retail rents to be paid during the pandemic is as a % is sales.

This is fair to landlords and retail tenants while traffic into shopping malls is substantially down.

Who knows when things will recover?

It's great to see Solomon Lew take this stand not only for Premier but it will help smaller retailers to stand together rather than be picked off one by one by landlords..

While Premier has the market clout and leverage (as most leases are up for renewal in 2020) it will not be a walk in the park for other retailers.

Don’t expect to walk in the door of a landlord and say “I want the same deal as Premier”:: the landlord will laugh and march you out the door.

I refer you my recent article that sets out the type of preparation you will need to undertake to be able to emulate Premier Retail’s strategy.


Premier Retail, who I consider to be one of the better run retailers in Australia with a talented management team, will struggle to make a profit next year without a substantial rent reduction and tight management of store and head office wages.

This demonstrates how critical rent negotiations and cost management will be.

In the next 12 months, the only potential variable expense that retailers can leverage will be rent, as retail wages have been cut to a minimum.

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