Christmas miscalculation blamed for driving store closures

The first few weeks of 2020 have already seen several Australian retailers announce store closures and staff cuts in a sign that Christmas 2019 did not go as smoothly as some had expected, according to one insolvency expert.

Jeanswest is just the most recent example, with the struggling clothing chain revealing plans last week to close 37 stores and make 263 staff redundant, after it fell into administration on January 15.

KPMG’s James Stewart, one of the administrators, described the restructure as a difficult but necessary decision to attract a buyer.

“We are very mindful of the serious impact store closures and staff redundancies have on people’s lives,” he said.  

“However, we must also work to [maximise] the opportunity for this business to be sold or restructured – to give it the best chance to continue.”

Jeanswest is hardly the only national retailer facing the prospect of closing some or potentially all of its stores. Harris Scarfe, Bardot, EB Games, Curious Planet (formerly known as Australian Geographic) and McWilliams Wine are all in the same boat.

At least one insolvency expert believes the recent rash of retail failures is due to the challenge of managing supply and demand across seasonal peaks.

“The summer holiday/Christmas period creates a really difficult strategic time for retailers in that they have to buy or plan for an influx of sales, but then also manage the impact of people taking holidays [and] therefore demand [dropping] very shortly thereafter,” Andrew Spring, retail insolvency specialist at Jirsch Sutherland, told Inside Retail Weekly.

According to Spring, it’s clear that some retailers had been counting on strong Christmas sales to “save” their business, though they were likely dealing with other issues as well.

“It’s not a failed Christmas season in isolation that’s creating a spike in retail insolvencies, but it’s these additional effects from prior periods that are weighing them down,” he said.

While the official retail sales figures for December 2019 have not yet been released, NAB is predicting a 0.1 per cent decline month on month, largely due to the growth of Black Friday, which brought Christmas shopping forward to November.

“Always something going on”

Summer sales were also impacted by the bushfires. Super Retail Group (owner of Supercheap Auto, Rebel, Boating Camping Fishing and Macpac) and Mosaic Brands (owner of Noni B, Rockmans and Katies) both reported a dip in comparable sales.

Spring conceded that the bushfires have had “a big impact” on retailers, but said there will always be unexpected events that make it challenging to succeed.

“There’s always something going on. For example, the Sydney light rail…that’s been frustrating for retailers,” he said. “There [are] always factors that have got to be managed in order to remain successful.”

Indeed, retail strategist and founder of 12High Nathan Bush believes the retailers that have gone into administration in recent months all have one thing in common.

“There’s a similar pattern around settling for the status quo and functional retail, rather than pushing the limits to stay relevant,” Bush told IRW.

“There’s a lesson here, and it’s not only for Jeanswest. It’s the importance of keeping up with the customer and staying relevant [which] sometimes means you have to be uncomfortable.”

Dean Blake contributed reporting.