As at 15 May 2017, Premier Investments’ share price was $12.70, giving the group a total market capitalisation of AUD$2.0 Billion. The group’s success in recent times has, in particular, been propelled by the success of Smiggle and Peter Alexander. These two brands now account “for the lion’s share of Premier’s half-year sales and earnings growth” (Low 2017) and the group plans to open further stores throughout Asia, the UK and North America (Chang, 2015; Mitchell, 2016; Low, 2017). It has been argued that Smiggle and Peter Alexander are particularly well suited to online retail and the group is targeting online sales of $100m a year by 2020 (Batholomeusz 2017). The strong results of Smiggle and Peter Alexander contrasts with the weak performance of other brands within the Premier Investments group including Just Jeans, Jay Jays, Dotti, Portmans and Jacqui E (Mitchell, 2016a).
This assignment is broken into three parts.
•Batholomeusz, S. (2017, March 21). Solomon Lew’s Premier Investments swims against the retail tide. The Australian. Retrieved from http://www.theaustralian.com.au
•Chang, O. (2015, October 10). Smiggle is going global. Business Insider Australia. Retrieved from https://www.businessinsider.com.au/
•Low, C. (2017, March 22). Premier pegs Smiggle’s next international territory. The Sydney Morning Herald. Retrieved from http://www.smh.com.au
•Mitchell, S. (2016a, September 22). Premier Investments cracks $1b sales as profits survey 18 pc. Australian Financial Review. Retrieved from https://www.afr.com.au
•Mitchell, S. (2016b, March 30). Solomon Lew first Australian inducted into World Retail Congress Hall of Fame. The Sydney Morning Herald. Retrieved from http://www.smh.com.au
(The above articles will be further made available through Interact)
Part A (70 Marks)
In recent years, directors and CEOs of companies have been placing more importance on holistic reporting of company activities rather than simply reporting what is required by the Accounting Standards, the Corporations Act and other legislation. The Global Reporting Initiative (GRI) is an international not-for-profit organisation that has pioneered and developed the world’s most widely used voluntary Sustainability Reporting Framework.
In 2013, the fourth iteration of the Sustainability Reporting Framework guidelines were released. These can be accessed via the link below.
Premier Investments’ Board Policies include statements concerning Business Sustainability and Ethical Sourcing.
With specific reference to Section 5.1 of the Sustainability Reporting Guidelines of the GRI, your task is to write a report that:
1.Provides an overview of the environmental and social impacts (positive and negative) of Premier Investments’ operations (10 Marks).
2.Identifies and discusses four key GRI disclosures that are likely to be of most relevance to the stakeholders of Premier Investments and reviews whether this information is provided by the firm (15 Marks).
3.Compares the quality and depth of environmental performance information provided by Premier Investments with the practices of Myer (20 Marks).
4.Evaluates whether widespread compliance with the GRI guidelines by Australian retail businesses would benefit potential investors, current shareholders and other stakeholders of Premier Investments (15 Marks).
The assignment needs to be thoroughly researched and presented in a standard report format including:
•Table of contents
The report is to be 1,500 words in length. References must be clearly acknowledged in-text and in the reference list and in accordance with APA style (marks available for academic writing: 10 Marks).
Part B (20 Marks)
A key part of Premier Investments’ growth strategy has included plans to open further Smiggle and Peter Alexander stores throughout Asia, the UK and North America (Chang, 2015; Mitchell, 2016; Low, 2017)
1.Identify the likely major costs associated with the ongoing operations of Smiggle and Peter Alexander (2 Marks).
2.Estimate the cost behaviour (fixed, variable or otherwise) of each of the major costs identified above in requirement 1 (2 Marks).
3.Given your understanding of the cost behaviour of the major costs associated with the ongoing operations of Smiggle and Peter Alexander, critically evaluate whether the use of break-even analysis would be a useful and reliable screening tool for Premier Investments as they assess the desirability of opening up new stores in new territories (6 Marks).
4.Develop a balanced scorecard that could be used to evaluate the success of Premier Investments’ strategy to open up new Smiggle and Peter Alexander stores internationally. For each perspective, identify one objective and include two measures for each objective. You should make use of both financial and non-financial measures (the table below can be used to summarise your findings). Briefly discuss the key features of your scorecard and the reasons behind your chosen measures (10 Marks).
Perspective Objective Measures
Financial 1. 1.
Customer 1. 1.
Internal Business Processes 1. 1.
Learning and Growth 1. 1.
Part C (10 Marks)
Peter Alexander offers a customisation service which enables customers to personalise their clothing purchases by adding their name or initials. Leveraging of this idea, the following discussion presents hypothetical information relating to a new proposal designed to improve the profitability of Just Jeans. The management team of Just Jeans have just received a new proposal one of the firm’s marketing managers. The proposal outlines a new investment to create a Custom Finish Lab. Through the Custom Finish Lab, online customers will be able to select an option to personalise purchased jeans in a range of finishes including blast wash, faded wash, and ripped and scuffed. The selling price, cost, and expected sales volumes of these custom options is provided below:
Blast wash Faded wash Ripped and scuffed
Selling price $30.00 $30.00 $35.00
Labour $7.00 $4.00 $10.00
Materials $4.00 $3.50 –
Variable overhead $4.00 $3.00 $6.00
Expected sales p.a. 8,000 10,000 7,000
Other costs associated with the Custom Finish Lab each year will include:
Equipment depreciation $200,000
The firm’s tax rate is 30%.
1.Calculate the number of blast wash, faded wash, and ripped and scuffed finish sales that will need to be made to:
b.achieve an after-tax profit of $350,000 (provide workings) (3 Marks).
2.Prepare a memo which suggests a number of possible strategic initiatives that Premier Investments could implement in relation to the Custom Finish Lab concept to enhance the break-even point and/or annual profit. These initiatives could impact the firm’s sales mix, selling prices, variable or fixed costs. Provide workings which illustrate how your proposed initiatives could influence the break-even point and forecast profit (7 Marks).