Replica furniture retailer Matt Blatt is working with advisors to facilitate a potential sale of the business as the full scope of the economic impact of the coronavirus pandemic becomes clear.
“We felt that with all shops closed, and no income, no sales, it would be a hard slog to recover,” Adam Drexler, the founder of Matt Blatt, told Inside Retail.
Matt Blatt closed its 12 bricks-and-mortar showrooms for health reasons less than two weeks ago and stood down staff with access to leave entitlements until the JobKeeper payments kick in.
But Drexler said even with these cost-cutting measures and support from the Government, the prospect of keeping the business running was unrealistic.
“We can’t see our way clear to just hibernate and open up again,” Drexler said.
“I personally believe that things won’t return to normal. There will be a big recession for many years, and that’s when a lot of companies will struggle.”
The retailer has reportedly received multiple acquisition offers, ranging from a complete takeover of the business as a going concern, to the acquisition of its assets only.
“We have a couple serious contenders, others are on the sidelines,” Drexler said.
He declined to name the interested parties or the advisors facilitating the sale.
A sale is just one of the possible scenarios for Matt Blatt going forward.
Until recently, Drexler was contemplating closing the business permanently. Now, he said, he would also consider taking on a partner. And he hasn’t fully discounted the option of staying open: “That’s definitely a possibility,” he said.
In the meantime, Matt Blatt is facing an urgent stock issue. With stores closed, the retailer’s warehouse is at capacity, and it has 26 containers full of new furniture on their way to Australia, with nowhere to go.
The retailer is attempting to make room by clearing existing stock through the online auction site Grays Online. Matt Blatt’s own e-commerce site has been temporarily suspended because it can’t guarantee delivery.
“It’s not a pair of shoes or a book, it’s a sofa that needs to be carried up three flights of stairs and unwrapped,” Drexler said.
According to documents lodged with the corporate regulator in October last year, Matt Blatt generated $47.6 million in revenue in FY18, an 8.5 per cent increase on FY17.
Significant increases in the cost of wages, rent and freight, however, eroded its before-tax profit to just $291,812, a year-on-year decrease of 82.3 per cent.
According to Drexler, Matt Blatt has been self-funded for many years and has no debt.