Premier Investments has issued a directive to landlords over rent in its FY20 results announcement.
The retail group has included a $8.7 million channel optimisation expense to potentially close 350 stores across Australia and New Zealand.
Over the past seven years, the business has closed 137 stores and recently has been very public in refusing to pay rent for closed stores during COVID.
"While it is not Premier Retail’s objective to close any stores, should landlords not accept the major shift in consumer shopping behaviour and adjust their rents according to consumer shopping preferences, store closures will be inevitable," Premier stated in its FY20 update.
"Premier Retail’s underlying FY20 EBIT result includes a $8.7 million channel optimisation expense to potentially close up to 350 stores in Australia and New Zealand.
"In addition, the Group has taken the necessary store asset impairments to close stores if suitable rental agreements cannot be reached."
The move comes despite a strong FY20 performance for Premier Retail, with Peter Alexander delivering record sales.
Peter Alexander reported a 16.3% increase to $288.2 million, underpinned by strong like for like sales growth in Australia and New Zealand.
Premier reports that the strength of the brand in Australia was demonstrated during the key Mothers’ Day week (week ended 2 May 2020).
During the week, despite all 122 stores being closed, Peter Alexander saw its online sales increase 18% on the prior year's total sales.
The brand has seen this momentum continue into the first six weeks of FY21, with Peter Alexander's total sales for the
period up 40% on the comparable period last year, despite Melbourne metropolitan stores being closed for the entire time.
Premier Retail CEO and executive director Mark McInnes said that the business' results were driven by strategic investment and focus.
"Our record result during this global health crisis is no accident but rather a function of our targeted strategic investments over the last decade, our high quality culture and the commitment of our global teams together with the strong support of our suppliers," he said.
During the period, Premier also saw its online sales deliver record growth, reporting an increase of 48.8% to $220.4 million.
The online business contributed 18.1% of the total Premier Retail sales for the year and 25.5% of total sales for the second half.
Premier reports that second half online sales were up 70% on 2H19.
Similarly to Peter Alexander, Premier's online sales' momentum has continued into FY21, with online sales for the first six weeks up 92% on the comparable period last year.
Source: Premier Investments FY20 results report
"Globally, the temporary closure of retail stores and the ongoing government implementation of social distancing in each of the countries and markets we operate, has significantly changed customer shopping behaviour," Premier said in a statement.
"Consumers are increasingly choosing to shop online in this highly uncertain environment.
"Over the past nine years, Premier has made significant investment in its fully integrated online channel and is well placed to maximise this significant swing in customer shopping preference," the business said.
Key results
Overall, Premier Investments reported net profit after tax (NPAT) of $137.8 million, up 29.0% on FY19.
Premier Retail saw underlying earnings before interest and tax (EBIT) increase 11.9% to $187.2 million during the period.
The business' like for like (LFL) sales were up 7.6% (constant currency) with total sales of $1.22 billion down 4.3% on FY19.
The business' Apparel Brands segment saw 1H20 sales up 6.1% to $393.5 million, while the segment's LFL sales growth of 7.5% was stronger than overall sales growth.
The segment delivered two year LFL sales growth of 16.9% from 1H18 to 1H20, before the impact of COVID-19 on 2H20 trading.
However, as stores across Australia reopened, in the final 10 weeks of FY20 the Apparel Brands segment delivered sales growth up 14.1% on the comparable period in 2H19 on a LFL basis.
Apparel Brands - Source: Premier Investments FY20 ASX Investor Presentation
As anticipated by analysts, Premier's children's stationery brand Smiggle was heavily impacted by COVID-19 and associated school closures.
During FY20 the Smiggle business saw sales decline by 16.4% to $256.3 million.
Chairman Solomon Lew thanked his team for their dedication during the pandemic.
"Throughout the devastating COVID-19 global health crisis, our absolute priority has and continues to be the safety and wellbeing of our teams and our customers.
"The Board and I are extremely proud of the dedication and professionalism displayed by all of our employees during these unprecedented times of hardship and uncertainty," he said.