Australian retailers ‘facing collapse’

dicksmithAustralia’s retail landscape could be headed for more trouble with the recent high-profile collapses of Dick Smith and Laura Ashley potentially just the ‘tip of the iceberg,’ according to specialist accounting firm, SV Partners.

Commercial data by the firm showed 11 Australian retailers with turnovers of over $100 million and three with turnovers of over $500 million, could suffer the same fate as Dick Smith and Laura Ashley.

According to the SV Partners March 2016 Commercial Risk Outlook Report, the retailers are exhibiting the same behaviours exhibited by the two companies before their voluntary administrations in late 2015.

When contacted for comment on who the unidentified retailers were, the company said data was completely anonymous. They added, however, “there are not too many retailers operating in Australia with a turnover of more than $100 million.”

The report analysed over 20 million financial records from various sources related to Australia’s 2.34 million operating businesses. The report identified the sectors and geographical location of businesses most at risk of default during the next 12 months.

“Retail is the canary in the coal mine for the Australian economy,” said SV Partners managing director, Terry van der Velde. “Our analysis shows that three other Australian retailers are sitting in the same high risk category as Dick Smith and Laura Ashley in December 2015, meaning we could see more big retail names in serious financial trouble in coming months.”

The report’s findings show nearly 50,000 Australian businesses are expected to face adverse financial events within the next 12 months. Adverse financial events include external administrations, petitions to wind up, defaults, bankruptcy and court writs.

Van der Velde said nearly 3000, or 5.7 per cent, of these 50,000 at risk businesses are retailers.

“It’s not just large retailers that are feeling the effects of increased international and online competition, our advisors have seen a steady increase in external administrations across the Australian retail sector over the last 12 months.

“Our findings indicate thousands of retail businesses of varying sizes are at risk,” he said.

ASIC’s September 2015 quarterly statistics confirm the retail industry experienced a 9.8-per cent increase in external administrations from the previous June 2015 quarter.

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