Premier digs in on rent as UK restrictions bite

Retailing giant Premier Investments is applying the same hardline stance to landlords in Britain and Ireland as it did in Australia, by not paying any rent while its 139 Smiggle stores there remain shut.

The 135 Smiggle stores in Britain will stay closed until at least June 1 and in Ireland a handful of stores will remain shut until June 29 in line with restrictions imposed by governments.

Premier Investments, which runs fashion brands including Jay Jays, Just Jeans, Portmans, Dotti and Peter Alexander, reopened the last of its Australian stores on May 15, except for airport stores.

But the Smiggle chain, which is its major hope for offshore success and which showed strong 14.2 per cent global growth in retail sales in the first half of 2019-20, is caught up in much tougher restrictions overseas, where Britain remains a hot spot for coronavirus cases and deaths.

Premier chairman Solomon Lew and retail chief executive Mark McInnes aren't budging on their rent stance for their offshore business, even though their biggest fight is with Australian landlords.

Analysts say that in Britain, where there have been tougher restrictions on retail and other industries as the toll from the coronavirus pandemic worsened, the shift to online shopping has been even more extreme and that it may be approaching one third of total retail transactions.

Mr McInnes told The Australian Financial Review on Friday the company, which has 900 stores in Australia, was being guided by the ''spirit'' of the proportionality concept outlined by Prime Minister Scott Morrison several weeks ago of both landlords and tenants sharing the pain.

Premier has vowed it would no longer be paying fixed rent to landlords, but would instead pay rent in arrears as a percentage of gross sales.

It had a blanket rule when its stores were temporarily shut in late March that it would not be paying any rent for the period of closure.

Several options

Mr McInnes said Premier had several options as it reconfigures its retail network, with the strong performance of the online channel in its brands such as Peter Alexander having continued even when the physical stores reopened.

He said 70 per cent of the leases across its store network in Australia were either set to expire in 2020 or were already in holdover, where the official lease has already ended and is running month-to-month.

The Smiggle businesses in Britain and Ireland have all qualified for the respective wage subsidy programs offered by governments.

Earlier this month, billionaire property magnate John Gandel was highly critical of Mr Lew's radical plan to restructure retail rent arrangements. Mr Gandel warned it would trash investment plans for future shopping mall development.

Mr Gandel co-owns Australia's largest shopping centre, Chadstone in Melbourne, with ASX-listed Vicinity Centres.

Mr McInnes said the substantial rise in e-commerce sales across the industry during lockdowns would continue to translate to higher rates of online sales.

He said it was clear that many retail outlets operated by various companies in shopping malls and other locations would simply not reopen again after the coronavirus pandemic.

Ruslan Kogan, the founder and major shareholder of online juggernaut Kogan.com, believes the coronavirus pandemic has brought forward four years of market share gains by online retailers in just two months.