Solomon Lew plans to build pocket money powerhouse Smiggle into a global operation on the scale of Coca Cola or Disney in the next decade.
Smiggle’s quirky, colourful stationery has proved irresistible to the tween market and owner Premier Investments plans to open 200 new Smiggle stores in Britain, Hong Kong and Malaysia in the next four years, including 16 British stores by Christmas.
This is a fashion forward statement brand for tweens and it’s a status thing to have a Smiggle pencil case.
Brian Walker chief executive Retail Doctor Group
The British operation is expected to run up sales of $200 million by 2019. Regional online stores are likely to follow the bricks-and-mortar rollout after the successful launch of Smiggle’s online British store during 2014-15.
Premier’s online sales grew by 31 per cent in fiscal 2015 and the group is targeting 10 per cent total sales through its digital chanel by 2020.
Smiggle is a business built on pester power, says Retail Doctor Group’s Brian Walker, and it has turned stationery into a fashion accessory for the tween market.
The vibrant chain ranges many of its products in colour blocks, encouraging kids to build a collection of any one product and ensuring multiple sales of exactly the same item.
It’s a strategy that sent Smiggle’s sales racing 36 per cent higher in the second half of the fiscal 2015 and 26 per cent higher for the full financial year.
This compares to Premier’s group sales growth of 8.3 per cent in the second half and an increase of 6.4 per cent in full year sales to $946 million.
“This is a fashion forward statement brand for tweens and it’s a status thing to have a Smiggle pencil case,” Mr Walker said.
“What’s interesting when you look at stationery, the industry is gradually shrinking in size … but these niche segments, which are creating fashion-based stationery are booming.”
Mr Walker estimated Smiggle had about 10 per cent of the total stationery market behind Wesfarmers’ dominant Officeworks and the Staples chain but he warned its success would spawn imitators.
“Smiggle may not have this market to themselves for a lot longer but they will be hard to topple,” Mr Walker said.
The stationery chains’ unswerving focus on its little shoppers had turned it into the perfect pocket money trap, says retail consultant Steve Kulmar.
“They don’t sell items they sell stories, which makes it very hard to buy just one,” Mr Kulmar said.
He said Smiggle was one of very few Australian retailers that took the trouble to re-merchandise their store every week, giving kids the perfect excuse to pop in every time they walked past with their parents.
Premier Retail chief executive Mark McInnes confirmed Smiggle’s kid-centric strategy, saying the best endorsement for a Smiggle product was when it got banned by a teacher.
He said the core range was built around stationery but it reached beyond the classroom to include accessories like water bottles and watches.
“What we are targeting is a customer of a certain age and we are bringing out products that improve their lives,” Mr McInnes said.
Smiggle and sleepwear star Peter Alexander are the key growth operations in the Premier retail stable, which includes fashion brands Dotti, Jay Jays, Just Jeans and Jacqui E.
The modest growth of these more mature apparel labels weighed on the groups over all sales growth but analysts said Premier’s disciplined cost controls delivered strong group profit growth, up 20.7 per cent to $88.1 million for 2014-15.
Citi analyst Craig Woolford said the challenge for Premier was to balance capital investment across its brand stable.
“The core brands continue to generate modest growth and Premier is focused on improving margins in these brands by managing inventory,” he said.
“Overall sales growth of 8 per cent is a very strong result but they have got to continue to maintain that balance of capital investment, It’s a tricky balance of where to allocate that capital.”