Before the end of November, Peter Alexander will have opened three stores in the United Kingdom, sparking an official launch runway of up to 10 stores in the near team.
Despite what seems like an awful time to be a discretionary retailer of any capacity, analysts at Morgan Stanley are feeling confident about this UK push by the sleepwear brand for one key reason: there is no dominant force that has capitalised on the sleepwear market in the region.
“We think Peter Alexander is well positioned to succeed in the UK given the market is highly fragmented with no category killer, suggesting there is room for a brand with a differentiated and fashion-focused product to disrupt the market,” Morgan Stanley analysts wrote in a note to investors.
“Success simply comes down to execution, where PA has been very consistent in A&NZ.”
In fact, its Australian growth has ballooned rapidly over the last five years, pretty much doubling its annual revenue from FY19 to FY24 to just over $500 million, according to parent company Premier Investments.
Alongside the UK retail push, Peter Alexander is also pitching to open four new stores and make four relocations or expansions in the first half of FY25 across Australia and New Zealand.
In October 2024, the brand’s flagship and number one store in Chadstone, Victoria will also be expanded by 50 per cent to 429 square metres.
“Following review of store design and customer experience, Chadstone will be the first store with the new innovative store concept design planned for rollout in future store investment,” Premier shared in an investor presentation.
“Over 20 further opportunities have been identified for both new and/or larger format stores in the near term to better showcase the wider product offering that has been developed in recent years as the customer base for the brand continues to broaden.”
Speaking at a media presentation, Premier chairman Solomon Lew said the key factors priming growth at Peter Alexander are its point of difference and wide consumer pool. Compared to its sister business Smiggle, Peter Alexander has a much larger audience.
“You've got children, you've got men's, you’ve got women's, you've got gift-giving, etc. It started out as a pyjama business, but now it's a lifestyle business,” Lew said.
“I've always said that if you've got the right product and you present it well, people will buy it. There is a lot of competition, but there's no competition for Peter Alexander. A lot of competition in the marketplace, but it's not Peter Alexander. It hasn't got that dachshund on the product.”
As for Smiggle, the stationary brand’s key demographic is youth, but technically it’s more likely parents who buy for their kids. And that brand has recorded a 7 per cent fall in revenue to $296 million. This is also down 3.4 per cent on FY19.
The decline in Smiggle’s revenue, according to Premier, is predominately due to the challenging discretionary retail environment across all its global markets. The brand operates in AU/NZ, across Europe and in parts of Asia.
Moreover, FY24 cycled a steep rebound in FY23 for Smiggle. As post-pandemic confidence returned, children were permanently back at school, and families were confidently able to plan for the first normal Christmas in over three years.
Lew said he and the team are confident that Smiggle will swing back, noting that it’s still a profitable business.
Morgan Stanley analysts also have hope, adding that Smiggle’s recent revenue tumble is more likely a “transitory” rather than a “structural” issue - with the comment likely arising due to the recent axing of the brand’s managing director over “serious misconduct”.
“We think Smiggle still has meaningful growth potential and will benefit from leadership renewal and cyclical tailwinds,” analysts wrote. “Competition is increasing (e.g., Kmart, Temu), however, we think Smiggle's value proposition is different (e.g., more premium, better quality and more depth).”
But there is one other key factor that will buoy Peter Alexander’s growth in the UK, according to the Just Group CFO John Bryce, who oversees all the retail brands under Premier Investments.
“We've had a lot of learnings from our international website/online business for Peter Alexander, and where the customers may be for us in other parts of the world,” Bryce said.
“As a group, we've got a decade of experience now operating in the UK. And just to have the back-end operating experience there feels like we are well placed to operate there.”
Bryce added that the team will invest significantly in marketing for the brand in the UK.
“This decision didn't happen overnight,” Bryce continued. “There has been many, many years that we've been talking and exploring and considering this. We've pushed go now, and we'll tell you in our first half [of FY25] result how Christmas went for Peter Alexander, but we are very excited.”