Retail Week has reported that Premier Investments, the Australian owner of stationery retailer Smiggle, is piling on the pressure for landlords to reduce rents drastically. If this cannot be achieved, the company would “walk away from 117 of its 134 UK stores” in what Premier Investments described as a “very distressed and uncertain macroeconomic environment.”
In a bid to ratchet up the pressure on landlords, Premier has taken out a A$25.9m hit on its current balance sheet in order to bring the fit-out costs for most of its UK stores in line with the 5-year lease breaks it negotiated when it first entered the UK market in February 2014. What this means is the retailer could walk away from most of its stores without incurring any future closure costs.
The Sydney Morning Herald reported that Premier Investments told investors at its full-year results on Friday that it had no qualms about walking away from leases, even in high-profile locations. Economic and political uncertainty has forced the company to reassess its retail leases in the UK, with Premier ending a number of lease agreements early in order to negotiate cheaper rents, at a one-off cost of A$25.9m.
Chief executive Mark McInnes said that while it was difficult to predict when conditions might improve, he was confident the UK economy would recover in due course, saying: "Great Britain has been through many, many trials and tribulations in the last hundred years, including a couple of wars. I’m sure when all this mess is over it will bounce back.”
Despite the impact of Brexit on Smiggle’s UK presence, the brand achieved record global sales for the year of A$306.5m, driven by an outstanding year in its Asian market. In its full-year results Investor Report, the company said that FY19 UK online sales represented 18% of total UK sales, “as consumers increasingly shop this channel.”
On a global scale the report reaffirmed Smiggle’s growth strategy, targeting to deliver A$450m in annual Smiggle global retail sales in calendar 2021 or calendar 2022.