Premier Investments parks Smiggle demerger plans as it turns focus on Myer tie-up

Solomon Lew’s Premier Investments will park its proposed demerger of kids stationery juggernaut Smiggle as it explores a tie-up with department store Myer.

Unveiling its full-year results on Wednesday, Premier revealed it would instead prioritise the potential combination with Myer and “the value which might be created for Premier shareholders”.

Premier is still mulling over a potential spin-off of its cult favourite sleepwear brand Peter Alexander.

“The board continues to see merit in the potential demerger of Peter Alexander and Smiggle, however, due to the current prioritisation of the proposal received from Myer, the board is no longer working towards the demerger of Smiggle by the end of January 2025,” Premier said.

“The ultimate timing of any demerger of Peter Alexander and/or Smiggle will depend on the outcome of the current discussions with Myer.”

Mr Lew later told reporters on a call: “The demerger . . . is still being worked on, but will be looked at at a point in time post-Myer, whether it goes ahead or whether it doesn’t go ahead.”

He said work had diligently taken place to analyse the proposal with Myer, where Premier holds a 31 per cent stake. Mr Lew added Premier was earning 20¢ in the dollar, while Myer earned 1.5¢ in the dollar.

“With the right structure, there should be potentially some very big upside,” he said.

“At this point in time, we haven’t seen any red flags but we’re not through the due diligence.”

Premier was the worst performer on the ASX, with shares closing down 9.1 per cent to $30.61.

Premier revealed profit hit $257.9 million in the year to the end of July, down 4.85 per cent from the previous 12 months. Revenue fell 2.7 per cent to $1.62 billion.

Its retail arm — which includes Smiggle, Just Jeans and Portmans — posted earnings of $325.9m, down 8.6 per cent on the previous year.

Premier said sleepwear brand Peter Alexander delivered another record sales result of $508.6m, up 6.2 per cent, as it confirmed plans to launch the brand in the UK, with the first three stores and website to open by November.

Meanwhile, Smiggle posted a 7.4 per cent slide in sales to $296m.

“The audience is a lot larger for Peter Alexander than it is for Smiggle because you’ve got children, you’ve got mens, you’ve got womens, you’ve got large sizes, you’ve got gift giving,” Mr Lew said.

“It started out as a pyjama business but now it’s a lifestyle business and so as they say, they’ve now got the full enchilada.”

Premier earlier this month sacked John Cheston as chief executive of Smiggle just three months after he was poached by rival billionaire retail magnate Brett Blundy to run global jewellery chain Lovisa.

Premier at the time said Mr Cheston was allegedly found to have engaged in serious misconduct — a claim he denies — and led to the immediate end of his employment.

Mr Lew on Wednesday was tight-lipped about further details on Mr Cheston’s sacking, but said the Smiggle management “lacked focus”.

“We’ve stated what we can. At head office we employ 650 team members and I can honestly say we hardly lose any staff to competitors,” he said.

“We have very strict rules at the company and if anybody does not adhere to those rules, they get exited immediately.

“I don’t think I need to spell out to you what the meaning of serious misconduct and serious breaches of contract mean.”

Mr Lew said there was a current search taking place both internationally, domestically and internally for a new Smiggle boss.

He would not comment on whether Premier was considering taking legal action against Mr Cheston.