Australian retail billionaire Solomon Lew has issued a stark warning, stating that intense cost-of-living pressures are severely impacting consumers in a way he has never witnessed throughout his long career.
Earnings Guidance Reflects Wider Economic Pressure
His company, Premier Investments, which owns the popular Smiggle and Peter Alexander brands, has provided its earnings guidance for the 26 weeks leading to January 24. The firm anticipates earnings of approximately $120 million. This figure represents a notable decline from the $129.4 million generated by these brands in the same period a year prior.
Speaking after the company's annual general meeting in Melbourne, the 80-year-old retail veteran painted a concerning picture of the economic landscape. "I can't recall this in all my years in business, (have I) ever seen a situation like this previously," Mr Lew told reporters.
He pointed to distressing indicators such as households struggling to pay electricity bills and needing payment extensions as evidence of the profound strain. While parts of the economy remain strong, he argued that the majority is under significant pressure.
Sentiment Weighed Down by Rising Costs
Interim CEO John Bryce added that shifting expectations around interest rate cuts have further dampened consumer confidence. "Non-discretionary costs keep rising, so that does leave less of a consumer wallet to spend in the discretionary retail space," he explained, noting a clear segment of consumers feeling the pinch.
Mr Lew confirmed that similar cost-of-living issues are affecting consumers in the UK and New Zealand, Premier's other major markets. The company's earnings forecast was labelled 'soft' by RBC Capital Markets analyst Michael Toner, coming in 18% below consensus expectations.
The market reaction was swift and severe. Premier's shares plummeted 14.9% to close at a two-and-a-half year low of $15.39 on Friday, marking a 37.5% drop since the start of the year. In response, the company announced a share buyback of up to $100 million from its available cash reserves over the next 12 months.
Challenges Within the Smiggle Brand
Beyond the broader economic headwinds, Premier's Smiggle business has faced internal turbulence. Its chief executive departed in September 2024 amid disputed misconduct allegations. The company has since appointed internet general manager Georgia Chewing as Smiggle's interim chief operating officer.
"It hasn't gone as well as it should have," Mr Lew admitted regarding Smiggle's performance, attributing a large part of the struggle to the economy. He highlighted upcoming movie-themed collaborations and "absolutely hot products at good prices" as part of the brand's strategy to recover.
In a separate strategic move, Premier completed the sale of its Apparel Brands division, including Just Jeans and Jay Jays, to Myer in January. Mr Lew concluded with a call to action for policymakers, stating, "The government has got a lot of work to do to get Australia back on track. I think there are huge issues."
