THE DISTILLERY: Premier makeover

Only one issue de jour, the Premier Investments retail changes. The group got a lot publicity yesterday and this morning for its profit downgrade, and restructure and revamp of Premier's retail brands (Just Group and others) by former David Jones boss Mark McInnes. All the commentary was complimentary, noting the slack retail sector's sluggish outlook. But let's start with the one jotter who bothered to look back into the past to check Mark McInnes' retail form. 
 
Fairfax's Insider, Ian McIlwraith, dug into the files and found a beauty: "Members of the McInnes fan club might recall that his strategic review following his arrival at David Jones in 2003 was peppered with similar energetic strategies and observations, and he delivered there until he eventually overreached with staff. The standout difference is that in 2003 McInnes was winding back the glam department store's online shopping site which he had assessed as not worthwhile, turning it into a promotional space. At Premier, McInnes thinks expanding the internet business is a priority." Very good point. So what does McInnes really think?
 
With that in mind, check out some of the reactions from the rest of the jottery this morning, starting with Fairfax's Adele Ferguson: "When the Woolworths boss Michael Luscombe warned last week that next year would be the retail sector's most challenging year, he wasn't kidding. While the stockmarket has factored in profit downgrades for retailers this year, deep sales discounting in July of up to 70 per cent across many shops should give consumers, business and the government food for thought. Solomon Lew's Premier Investments, which owns Just Jeans, Smiggle, Peter Alexander and Portmans, was the latest listed company to issue a profit downgrade." And Ferguson supports a tax on internet imports from offshore 'to save some jobs'. Hmmm!

The Financial Review's Chanticleer columnist wrote this morning: "Solomon Lew's new right-hand man at Premier Investments, Mark McInnes, released a profit downgrade of Just Group and turned its strategy on its head." 

Fairfax's Malcolm Maiden wrote yesterday: "The store closures former David Jones boss Mark McInnes announced today form part of a sweeping overhaul of the Just Group he now runs for Solomon Lew, but make no mistake: McInnes is moving because retail has hit the wall in Australia. A raft of reports and statistics including an ANZ Bank survey of small business conditions last week confirm that clothing chains are taking the most heat as the Reserve Bank keeps interest rates high to contain inflation, and as consumers spend less, and save more. McInnes added Just to the list of bearish retail indicators today, outlining a downgrade in expected profit before interest and tax in the current year from the previously expected $80 million to $85 million to between $64 million and $66 million. And that's an estimate that comes before once-off charges that will flow from the things McInnes plans to do to build Just's defences against the retail downturn."
 
The Australian's John Durie wrote yesterday: "After slashing earnings guidance by 40 per cent this year Mark McInnes is betting by applying his David Jones formula to the Premier brands he can quickly recover lost ground. The Premier portfolio ranges from poor performers like Dotti to superstars like Smiggle and just which one contributed to the 2 per cent growth in sales over the last half was not clear. McInnes confided his favourite economists at Access saw some light at the end of the tunnel, with retail sales to increase in 12 to 18 months time. This gives him some time to roll through his bag of tricks as outlined in his six-point plan, including concentrating on the five core brands, company-wide efficiency program and expansion of his two star brands Peter Alexander and Smiggle."
 
The Herald Sun said this morning: "The retail powerhouse behind Just Jeans, Jay Jays and a host of other chains is careering towards a showdown with the nation's shopping centre landlords as it moves to head off a surge in rental costs. Premier Investments chief Mark McInnes says the group will axe jobs and close as many as 50 of more than 900 stores nationwide as rental contracts expire in the coming years. The warning came as the group took the knife to its earnings outlook for the year to July 30, blaming the "challenging" conditions that have engulfed the sector."
 
The Australian reported conventionally this morning: "Premier Investments' retail arm has launched an offshore expansion plan and is eyeing possible acquisitions, after slashing 2011 profit guidance and foreshadowing the closure of up to 50 loss-making stores. Premier Retail chief executive Mark McInnes unveiled the detailed plan yesterday in response to a margin crunch caused by heavy, industry-wide discounting and weak consumer sentiment. Launching a "six-point profit improvement plan", the former David Jones boss said rivals were discounting prices by 60-70 per cent in a last-ditch bid to clear winter stock, but shoppers were "still not buying"."
 
The paper's Tim Boreham wrote this morning: "Just as our local hero Cadel Evans rode the Gallic hills and dales with dash, chastened retail whiz Mark McInnes promises to ride the retail cycles with similar aplomb in his new employ. At his debut briefing as Premier Retail (Just Jeans) head, McInnes offered mixed messages on the shopping landscape. But the broad message was that, sales-wise, the Just suite of brands is faring better than might be expected. In one breath, Premier is getting tough on landlords and threatening to close up to 50 underperforming outlets. In another, it reveals up to 100 new outlets have been identified."
 
And Boreham wrote on The Australian's website yesterday: "Mark McInnes may have left David Jones in messy circumstances, but he's a gun retailer and it looks like he's getting his groove back as head of Premier's retail (Just Jeans) business. At his first strategy briefing in his new employ, McInnes warns retail landlords that Premier plans to close up to 50 under-performing stores and outlets in danger of becoming loss makers. The big landlords, which are not known themselves for blinking in negotiations, are expected to better align their rents with the performance of the centres."
 
Business Spectator's Stephen Bartholmeusz wrote yesterday: "The most striking aspect of Mark McInnes' strategic review of Just Group is that rather than being some broad vision, its conclusions are crammed with the operational detail of the group's portfolio of brands. What that says is that the former David Jones chief executive sees the most opportunity not in major acquisitions (although they remain possible) but in simply managing the brands better. Implicit in the review is a view that the Just Group hasn't been managed as well as it might have been. Whatever one's view of McInnes, no one disputes his abilities as a retailer or his lengthy track record of managing the detail of retail fashion businesses to produce material and consistent improvements in efficiency and returns on investment."
 
The Australian's Nabila Ahmed said this morning: "Mark McInnes was his usual indomitable self yesterday, even as he downgraded earnings at his new shop, but the Premier Investments retail boss and his rivals will no doubt take heed of the latest advice from fund manager Perpetual. With annual retail sales growth at a near-record low of 2.2 per cent – less than the average recorded during recessions – Perpetual's head of investment market research, Matt Sherwood, has declared that Australian households are in recession."
 
Elsewhere, Fairfax's Ian Verrender wrote today: "As baptisms go, this could be as about as fiery as it gets. Just a few days after being gonged as heir apparent to the Commonwealth Bank of Australia throne, Ian Narev is looking on as debt bushfires in Europe and a smouldering political impasse in America threaten to combine for yet another global financial conflagration. Gold prices once again are nudging records while stock and funding markets are edging away from greed and back towards fear. An air of disbelief has drifted across financial markets in recent days, that Washington could be so engrossed in an internal political squabble that it could disregard the self-inflicted harm it is doing to its reputation and the threat posed to to its long-term future." 

Fairfax economics writer Peter Martin says: "The Reserve Bank has a sobering message for investors in banks and the executives who run them – get real, the days of double-digit growth are over and unlikely to return. In speaking notes prepared for a Property Council seminar in Darwin yesterday assistant governor Malcolm Edey said while Australian banks had come through the crisis in good condition with lost profits restored, it was unlikely they would ever again enjoy "the days of consistent double-digit growth in lending we saw in the pre-crisis years"." This is not a new story: RBA officials have been making this point since late last year and more strongly since March. 
 
Michael Pascoe wrote on smh.com.au: "There's a curiously calm consensus in the commentariat that Wednesday's consumer price inflation number will be benign, well within the Reserve Bank's comfort zone, allowing the money market to continue to bet on the possibility of an interest rate cut later this year. Probably not. The consensus forecast is that the RBA's core inflation measure will come in with a rise of 0.7 per cent for the June quarter, giving a year-to-date inflation measure of 2.5 per cent, smack in the middle of the RBA's target range, and all is well with the world. It is bemusing that market economists seem to think the avowedly forward-looking RBA cares much about what inflation was running at last year. The 2010 December quarter CPI? History. The September quarter? Ancient history."

And finally, The Australian's John Durie wrote this morning: "ConnectEast chairman Tony Shepherd may face more protests than expected over the proposed privatisation of the company, with some shareholders claiming minorities are being locked out. The majority, though, appear to be voting with their feet, as shown by the 146 million shares which changed hands yesterday at just below the bid price, with hedge funds said to be the buyers. Two years ago Shepherd struggled to get buyers for the stock at 33 cents a share but today some are arguing he is giving the company away too cheaply and – worse – locking minorities out of the deal. "