Another bout of misleading moans from a leading retailer, who should know better. And coming from David Jones, Mark McInnes, the newish CEO of Premier Retail Group, has form as a whinger.

In fact in picking up the former David Jones CEO, Premier’s chairman, Solomon Lew found a retailing executive who is of a like mind: Mr Lew is a moaner about things beyond his control, such as the silly campaign for the GST to be levied on imports from offshore, showed earlier this year (co-moaner Gerry Harvey has abandoned that whinge).

That campaign has died away (the Productivity Commission is examining the idea but has already pointed to the difficulties involved), but yesterday Mr McInnes gave it another fruitless kick along, and the media again reported it and other comments, without question.

Premier yesterday revealed its 2010-11 results (which included the Just Group reporting a 50 per cent dive in full-year profit on flat sales) and according to the morning papers, such as the The Sydney Morning Herald, Mr McInnes waxed lyrical about the failings of the Federal Government.

”[Consumers] lack confidence and we require a bit more leadership from the government to be honest with you…

”We need the government to own up to the problems they have created in the lack of confidence in the consumer environment. People have actually got the money, employment is good, the savings rate is high but there is a fear and a lack of confidence out there and, for discretionary retailers, that’s a real issue.

”And, when you add to that a real lack of confidence in the current government, be that the carbon tax, I mean what is that? Who understands that?”

McInnes also criticised the government for leaving untouched the present GST-free threshold on internet purchases, which allows shoppers to buy overseas goods under $1000 in value with no GST charged.

The comments are as silly as they sound. Consumer caution is as much to do with the higher savings (back to normal levels) of Australians as any crisis of confidence caused by governments.

His comments completely ignore the fact that overseas travel and car purchases are at or near record levels: both involve significant spending decisions. But in sectors Premier and Mr McInnes have no role in. Premier is heavily involved in apparel, fashionwear, especially for women, and it’s tough, as the big profit falls at rivals like Noni-B and Specialty Fashion (Millers), attest.

But let’s take a look at how Premier actually performed in the 2011 financial year. The detail of the results reveals a lower profit, not as low as the one reported above (the “50% dive”).

The company which owns fashion outlets Just Jeans, Peter Alexander, Smiggle and dotti, revealed a 49% fall in full year profit to $40.5 million because of $11 million in costs associated with the revamp revealed on July 25. That’s not the result of Government actions or cautious consumers, but a conscious decision by management to incur costs by restructuring the company.

Before those costs the Premier’s group pre-tax underlying profit showed a less disturbing 18% fall from $89.3 million in 2010 to $73.3 million in the latest year and an 12.5% drop from $63 million to $51.5 million, on an after tax basis. Premier Retail reported sales up 1.1%  to $866 million. So no real sales growth and a fall in profits, it is tough in the fashionwear sector. In fact the profit performance was better than the likes of Noni-B and Specialty Fashion (whose profit for the year halved thanks to a second half slump).

Premier declared a final dividend of 18c, fully franked, in line with the dividend in the prior corresponding period. That made a full year payout to shareholders of 36c a share, unchanged from 2010.

Companies that are struggling or see tougher times ahead (which Premier claims to see) don’t leave dividends unchanged, they cut them to conserve cash. That Premier left it intact is a sign that the board isn’t too concerned about the tough trading conditions. It is also a sign that Solomon Lew, who controls Premier, likes to have his dividend income from his shareholding.

And buried in the result was another positive, which most reports, and Mr McInnes, ignored or underplayed. Premier Retail managed a small improvement in its profit margin in the year: “Gross margins improved by 53bps to 60.2% notwithstanding the difficult environment,” directors said. That’s an increase of 0.53%. Now that’s not a bad effort and should be remembered when next you hear people moaning about how tough it is some areas of retailing.

But it’s a bit rich, if not hypocritical for a retail executive such as Mr McInnes to be blaming the Federal government when his company managed to boost its gross margin in a tough trading environment, to a very high 60.2% (or 60.2c in every dollar sold).

Later this week David Jones is due to release its full year figures, and no doubt we will get another list of ills caused by others, rather than the company and its management.

Peter Fray

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