The Just retail stable that Solomon Lew's Premier Investments owns demonstrated on Thursday that retailing can still generate strong returns.
As the big department stores struggled, Just Group boosted earnings before interest and tax by 9.8 per cent in the half year to the end of January, underpinning a 19.2 per cent increase in Premier's pre-tax profit to $64.5 million.
Premier's net cash flow was 64.5 per cent higher at $75 million, it boosted cash on its balance sheet by $22.6 million to $317 million, and it is carrying debt of only $85.5 million in the retail business.
That means Mr Lew could hit the takeover path if he wants to, but he's more likely to maintain the current, very successful course.
His retail boss, Mark McInnes, is driving profits higher by reforming chains in the Just stable including Portmans and building online platforms across the stable. He is also focusing on two brands for outright expansion – the Peter Alexander sleepwear chain (sales up 16.7 per cent in the latest half compared with a year earlier) and Smiggle, a quirky chain that describes itself as being in the business of "fun, fashion-forward stationery".
Smiggle boosted sales by 12.4 per cent in the half, but the most interesting thing is that eight out of the top 10 Smiggle stores by sales are in Singapore, the beachhead that Mr Lew and Mr McInnes have established for the brand in Asia.
There is now a plane full of Smiggle gear flying into Singapore from Melbourne every day, and if Smiggle replicates that sort of performance as it expands into countries including Japan, Malaysia and Indonesia it could be a very big long-term sales and profit engine for Mr Lew's retail empire.
The key, Mr McInnes says, is that Smiggle is offering something that is not yet available in Asia. There are plenty of shops selling similar youth-oriented, on-trend stationery and knick-knacks, but none that do so in the same concentrated and specialised way, under a single store brand.
Mr Lew says he still thinks trading conditions are tough in Australia. With Smiggle he has something his competitors do not, however: a store brand that has significant growth potential in the fastest-growing part of the global economy.