Solomon Lew has added some teeth to his years of threats of walking away from bricks-and-mortar stores. Picture: Asanka Ratnayake/Getty Images)
Solomon Lew has added some teeth to his years of threats of walking away from bricks-and-mortar stores unless rents are lowered to reflect the new realities of shopping behaviour, with his Premier Investments booking $8.7m in charges to prepare for the possible closure of 350 stores across Australia and New Zealand.
Unveiling Premier Investments’ full-year results on Friday, chairman and major shareholder Lew highlighted what the company titled a “channel optimisation expense” for fiscal 2020 that could pave the way for mass closures.
Premier also claimed that without its stable of fashion chains, a shopping centre would be worthless.
Lew, who has turned flinging accusations and threats at shopping centre landlords into something of an art form in recent years, warned Premier Investments could close 350 of its 1040 stores in Australia and New Zealand if landlords don’t accept the major shift in shopping behaviour and lower their rents in response.
It is the latest retailer to threaten mass store closures in the face of collapsing customer foot traffic at shopping centres since COVID-19 emerged, with other chains closing their stores or demanding significant rent relief.
Premier Retail, the retail operator of Premier Investments fashion chains including Peter Alexander, Just Jeans and Portmans, has closed 137 stores over the past seven years. Lew said this demonstrated its willingness to walk away from stores with unrealistic rents that delivered unprofitable sales.
Added pressure comes from the fact over 70% of its stores in Australia and New Zealand are either in hold-over, on month-to-month leases, or with leases expiring in 2020.
“If you look at our balance sheet compared to others that says everything. Of course they (landlords) want us, and you have seen how the (retail) industry has been decimated over the last couple of years and how many retailers have gone out of business,’’ Mr Lew said.
During the COVID-19 pandemic Lew has earned the ire of landlords by refusing to pay rent for his shuttered stores, accusing some shopping centres of not operating clean and safe environments and publicly throttling landlords over rent payments at a time when their centres are wastelands.
The chief executive of Premier Investments’ retail arm, Mark McInnes, said the company was already in negotiations to gain rent relief and that landlords had to realise they needed his stores in their sites.
“I hope the landlords are all sensible enough to reason, to understand that without Premier Investments brands in their centres their centres are worthless. If you have a centre without Peter Alexander, if you have a centre without Smiggle, if you have a centre without Just Jeans, without Jay Jays, without Portmans, without Dotti, without Jacqui E, you don’t have a shopping centre.
“We have many stores on capped (rent), many stores on percentage rents. We are in the midst of negotiations with landlords … we have also taken the decision to create a channel optimisation provision on up to 350 stores and we have impaired the necessary assets.”
It was not the retailer’s objective to close all these stores but it would take that step if needed, and some stores had been closed in the last few days.
“It is not our objective to close stores but if we don’t reach the appropriate rental agreement we will, and as an example of that just this week alone we have closed three stores in Sydney, so we have got a long way to go there.
“Given the consumer changes in shopping preferences we believe that landlords and ourselves have to find the right mechanisms to continue our business together.’’
McInnes said there were plenty of landlords who “got it” and wanted a good relationship with Lew and Premier Investments, seeing the importance of having its stores in their shopping centres.
“And there are some landlords who don‘t get it and those landlords, we put ourselves in a position if they don’t offer us a rent that keeps our store profitable we will close.’’
