Premier Investments has today announced an overhaul of its Just Group business, which will see up to 50 under-performing stores shut down, following a strategic review of the company.
The strategic review, spearheaded by chief executive Premier Retail Mark McInnes, has highlighted unique strengths within Just Group's platform and a broad range of opportunities for the Group, including the expansion of the Peter Alexander retail network and acquisition of new brands that fit into the Just Group stable.
The 36-page report also includes details of a “Six Point EBIT Improvement Plan”, which details an organisation-wide cost efficiency program, a two-phase gross margin expansion program to focus on sourcing, mark-downs, reduced inventory levels and factory outlet performance, and plans to build Just Group's online and social media presence.
The organisation-wide cost efficiency program, a 100 Point Project Plan designed to offset “price increases without impacting customers”, will also include a focus on non-merchandise procurement, and will see Just Group close up to 50 “loss-making stores at lease expiry”, according to the report.
Ex-David Jones' CEO McInnes, who joined Premier in April this year, said the group has already started putting the “Six Point Plan” into action, and will be investing significantly in its core apparel brands – Jay Jays, Portmans, Jacqui E, Peter Alexander, and Just Jeans.
“Just Group has very significant opportunities to grow organically. Implementation of our Six Point Plan is already underway, and we have budgeted for EBIT improvements from the plan in FY12,” he said.
McInnes also confirmed that some redundancies would be carried out following the completion of the strategic review, in order to realign the “organisation to the key strategic imperatives”.
The company also warned of a number of one-off charges which will take place, relating to asset write-downs, onerous leases and store closure costs associated with the closure of loss-making stores at lease expiry. The one-off charges are expected to be between $14 million and $16 million in full-year 2011.
The completion of the strategic review also coincides with a very challenging period for the Australian and New Zealand retail sector, and McInnes admitted that Premier had felt the pressure from the tough retail environment.
“Recent trading has been challenging. Our business is highly school holiday (July) dependent, and we have not experienced the expected uplift from July school holidays across Australia and New Zealand that we experienced in April,” he said.
“In addition, margin has remained under pressure, as industry wide discounting has increased. We have moved swiftly to better align our cost base for FY12, as well as ensure our excess winter inventory has been priced to clear over the last two weeks of this month.”
However, according to both McInnes and Premier Investments' chairman Solomon Lew, the future looks bright for the company overall, with both heads expecting Just Group in particular to commence the financial year with a clean inventory position.
The company, which also released its guidance for the 20111 financial year today, said it expects to profit from a 2.4 per cent increase in sales in the second half of fiscal 2011(to 30 July, 2011) across Australia and New Zealand, with full year earnings before interest and tax (EBIT) to be in the range of $64 million to $66 million. Premier Investments' consolidated underlying profit before tax is expected to be between $72 million and $74 million.
Premier expects FY12 EBIT for Premier Retail (Just Group) to be in the range of $80 million to $95 million.
“Clearly the profit performance for FY11 is disappointing, notwithstanding the very challenging retail environment. However, if there is no further deterioration in the general retail environment, the board firmly believes that the combination of Mark McInnes’ appointment; the implementation of the strategic review with a clear focus on merchandising, cost controls and margin expansion; the strong senior executive hires made by Mark; and our clean inventory position, provide the platform for a return to acceptable levels of sustainable growth. This is reflected in our FY12 guidance,” Lew said.
As reported on Ragtrader.com.au, McInnes, ex-CEO of David Jones, was appointed as chief executive of Premier Retail in March and began his role on April 4 this year. He also recently boosted Just Group's senior management team, with the hire of four new executives last month.
The fresh recruits include Karen Russell, former Target Australia business manager and Deanna Moylan, ex-Myer business manager of women's youth apparel and accessories, Martin Hourigan, former David Jones general manager non-merchandise procurement, and former Centro executive Graham Terry.