The owner of Just Jeans and Peter Alexander expects record profits this year, despite the coronavirus hit

Just Jeans. Image: Westfield.

Rent reductions, wage subsidies and strong online sales growth will help Solomon Lew’s Premier Investments deliver record profits this year, even though sales plunged 18 per cent in the June-half due to the coronavirus pandemic.

In a trading update on Thursday, Premier said it expected to lift full-year earnings before interest and tax by between 10.5 per cent and 11 per cent to between $184.8 million and $185.8 million, compared with consensus forecasts around $171 million.

June-half earnings were expected to rise between 9.7 per cent and 11.7 per cent to between $58.7 million and $59.7 million, despite a $106.5 million or 18 per cent fall in global sales to $484.2 million.

Premier shares surged as much as 12 per cent to $19.02, their highest level since February.

The better than expected outcome reflects strong online growth and massive cost savings from rent and wages.

Premier refused to pay rent while stores in Australia and overseas were shuttered and will receive tens of millions of dollars in wage subsidies for about 9000 staff who were stood down in Australia, Singapore, the UK and New Zealand while stores were closed.

Premier, which owns Smiggle as well as fashion brands Jay Jays, Just Jeans, Portmans, Dotti, Peter Alexander and Jacqui E, closed its Australian stores for about six weeks in April and May, reopening the last stores on May 15.

Its 135 Smiggle stores in Britain and a handful of stores in Ireland remained closed until June. About 165 stores in Melbourne are currently closed under stage four lockdown rules.

While stores were closed, online sales surged, rising 70 per cent to $123.3 million in the June-half and contributing 25.5 per cent of Premier sales, up from 12.3 per cent a year ago. This lifted online sales for the year by 48.8 per cent to $220 million or 18.1 per cent of total sales.

Due to recent investments in distribution centres and supply chain integration, Premier’s online sales are significantly more profitable than its bricks and mortar sales.

Premier Investments has also benefited from a rebound in the share price of appliance maker Breville, which on Thursday reported an 11.3 per cent increase in underlying net profit to $75 million for the 12 months ending June.

Breville shares plunged 57 per cent to a low of $10.80 in March amid fears of supply shortages and reduced consumer demand, but have rebounded strongly over the last four months to more than $27.00.

Premier’s 26 per cent stake in Breville is now worth $969 million.

Premier has a July year-end and will release audited full-year results in late September.

The company said the new guidance did not take into account potential asset value impacts resulting from COVID-19.

“Whilst there remains significant uncertainty ahead, Premier is well
positioned with a portfolio of brands that are likely to hold value, an online business that delivers a higher EBIT margin than in-store sales, and is facing an environment with potentially fewer competitors in the medium-term,” Credit Suisse analyst Grant Saligari said in a recent report.

This story originally appeared in the Australian Financial Review. Read the original story here.