Solomon Lew’s Premier to post record profit thanks to JobKeeper, online sales

Solomon Lew's Premier Investments has defied the coronavirus pandemic's hit to the retail sector with a forecast record profit for the 2020 financial year helped by strong online sales and millions claimed in JobKeeper subsidies.

In a trading update released on Thursday, Premier said it expects its full-year earnings before interest and tax (EBIT) to be between $184.4 million and $185.8 million, an approximate 11 per cent increase on the prior year.

Solomon Lew’s Premier Investments has told investors to expect a record profit figure for the 2020 financial year.Credit:Paul Jeffers

This record figure is despite an 18 per cent, or $106 million, decline in sales across the second half of the financial year after the retailer's stores were shut globally for two months due to COVID-19 and the business stood down 9000 staff.

The forecast profit figures are well ahead of consensus forecasts, which predicted the company's full-year EBIT to be around $121 million. Shares soared 10.6 per cent to $18.67 following the update.

Premier attributed the better-than-expected result to a 70 per cent rise in online sales across the second half, coming in at $123.3 million and contributing to a quarter of the company's total second-half sales.

"Premier Retail’s online sales deliver significantly higher EBIT margin than the EBIT margin of the retail store network," the company said. Second half EBIT is expected to grow between 9.7 per cent and 11.7 per cent to around $59 million.

Sales at the company's re-opened stores since May have also been strong, it said.

However, Premier has also been a significant beneficiary of the government's JobKeeper wage subsidy and the New Zealand government's similar program.

The company noted it had "maximised" the use of various subsidy schemes along with rent relief globally, however it did not specify the amount claimed through JobKeeper.

With 9000 staff stood down globally, the amount of JobKeeper claimed by Premier is likely to be in the tens of millions. In New Zealand, the company has claimed $NZ4.56 million ($4.19 million) for 840 staff.

Premier also refused to pay rent at its stores globally during the pandemic shutdown, a move that has likely significantly cut costs for the company. Further details on the subsidy amounts will be provided at the company's full-year results in late September.

These results relate to Premier's retail division only, and not to its investment portfolio, which includes sizeable stakes in department store Myer and appliance manufacturer Breville, the latter of which fell 9.2 per cent to $24.78 on Thursday after reporting a weaker-than-expected full-year result. Premier's 26 per cent stake in the company is worth $880 million.

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