‘Unacceptable’: Big Aussie retailer slammed
One of Australia's largest retailers has been slammed as "unethical" for posting record profits while taking up to six months to pay suppliers.
Premier Investments, which owns shopping centre staples including Just Jeans, Smiggle and Peter Alexander, has rarely been out of the headlines in the last few weeks.
Last Friday, the firm, chaired by retail veteran Solomon Lew, announced a 29 per cent surge in profits to $137.8 million.
That's despite the company being a major beneficiary of taxpayers' cash through the JobKeeper wage subsidy program designed to keep people in work during the coronavirus pandemic.
While banking some big bucks, Premier has also cried poor saying it could close up to 350 stores unless its rents come down while declaring landlords "will be responsible for job losses" if the shops shut.
The company, that also owns Portmans, Dotti and Jay Jays, also refused to pay rent on any store in April after it closed all of them during the national lockdown.
But Premier has defended its actions saying there was "unprecedented uncertainty" from the pandemic which led them to seek "support from suppliers for temporary flexibility in payment terms".
It says it has "progressed towards" usual terms but some reports have said that could still be up to four months from delivery to payment.
Speaking to the Australian Financial Review Monday, the Small Business Ombudsman Kate Carnell said Premier was among a group of retailers and other firms that were holding off payments to smaller suppliers to improve cash flow. She said the behaviour was "unethical".
"They're pushing out payment times to little guys that have nowhere to go, that are doing it tougher than anybody.
"It is particularly unacceptable for big entities like Premier to use late payments as a method of making their figures look better."
The Ombudsman's office also chided department stores Myer and David Jones, fashion retailer Sussan Group that owns Sportsgirl, as well as Coca Cola.
However, it's Premier's payment terms that have raised most eyebrows.
In most cases, retailers pay their suppliers after they have received the goods. Often this is somewhere around 30 days following delivery.
However Premier's payment terms mean some suppliers had agreements that quite regularly meant they had to wait 120 days to be paid for their products. According to reports in the Sydney Morning Herald when the lockdown began and Premier closed its stores it told some suppliers they might have to wait for as much as 180 days - or six months after delivery - for payment.
The Ombudsman is calling for companies to be transparent about how long they take to pay suppliers. The hope is this may reduce the time between delivery and payment.
Other retailers are also thought to have increased the time to make payments but it's not known if any went up to 180 days.
A spokesman for Just Group, which is owned by Premier, said the pandemic led to a huge "revenue impact".
"Like many retailers, we sought support from suppliers for temporary flexibility in payment terms. This formed one part of a package of measures adopted by the company to preserve its sustainability during a period of extreme turmoil.
"With the gradual reopening of stores, Just Group has progressed towards more usual payment terms."
Another eyebrow raising action by Premier has been the almost $60 million in taxpayers' fund its received through the Federal Government's wage subsidies program.
Its takings did indeed nose drive at the height of the lockdown, a prerequisite for JobKeeper, but over the entire year sales were only marginally lower.
The company has said $35 million of the JobKeeper cash went straight to employees who weren't working as stores were closed and so there was no benefit to the retailer.
The Guardian estimated Mr Lew could receive as much as $24.5 million in dividends from his large stake in the company.
Earlier this month, Shadow Assistant Treasurer Andrew Leigh said millions of dollars was being paid out in dividends by Australian companies that had, in turn, received millions of dollars in wage subsides.
He said JobKeeper should be renamed "dividend keeper".
Mr Lew said no dividends would be paid out of JobKeeper funds received by Premier, but rather out of takings.
He added that the bumper annual result was "not a product of luck" but a reflection of a decade of strategic, targeted investments.
STORE CLOSURE THREAT
Last week, the company said it could close up to 350 of its stores due to an almost 50 per cent rise in online sales and what it claims are high rents.
It said leases on 70 per cent of its store network either expired in 2020 or were on a rolling basis so could be easily exited.
"While it is not Premier Retail's objective to close any stores, should landlords not accept this major shift in consumer preference and shopping behaviour, and adjust their rents accordingly, more stores will close," said Mr McInnes.
"If we can't reach commercial terms on a suitable rental agreement … we can just leave."
The company's results includes an $8.7 million expense "to strip out our stores and leave" but it has not counted for any redundancies, with Mr McInnes saying the aim would be to redeploy staff to other outlets "where landlords understand what's going on".
"If landlords don't do that, they will be responsible for job losses and it will be them who have made that decision."
Earlier this month, Mr Lew laid into Myer of which Premier holds an 11 per cent stake.
He criticised the store's management which announced a $172.4 million annual loss for the last financial year.
"Today's results are disastrous and shameful. Two years into (Myer CEO) John King's tenure - it's clear the Myer turnaround is in tatters.
"As a long-suffering investor and supplier, Premier itself is perplexed.
"The numbers are dire - notwithstanding the impact of COVID-19, the business is trading beyond poorly," it added.
Originally published as 'Unacceptable': Big Aussie retailer slammed