It’s the end of the line for Dutch denim brand G-Star Raw in Australia.
The local arm of the Dutch company has permanently closed all 57 of its bricks-and-mortar stores after voluntary administrators Justin Walsh, Sam Freeman and Stewart McCallum from EY failed to find a buyer after its collapse in May.
A half dozen potential buyers reportedly had a “genuine look” at the business over the past three months, but declined to proceed.
Walsh believes the high level of uncertainty surrounding the end of JobKeeper was a major factor in the lack of interest from buyers.
“There’s a real concern about what retail will look like when the stimulus ends,” he told Inside Retail. “My personal view is that there will be a significant rise in unemployment, and that must translate into a lack of demand for retail.”
Walsh said the administrators got lucky when they took over the business in mid-May, because the government’s wage subsidy had created an artificially “robust” trading environment. But he warned that this period will be short-lived.
“We’re telling our clients to make the most of the current period and prepare for tough times ahead,” he said.
The combination of JobKeeper payments being reduced, commercial rent relief coming to an end and the Australian Taxation Office returning to recovering debts in the months ahead will squeeze retailers from both sides.
“I see retail as gradually beginning to struggle leading into Christmas, but I see the hardest time being in the new year,” Walsh said.
Smart retailers are acting now to renegotiate leases and get finance in place to carry them through the slowdown in spending that’s still to come.
That is easier said than done at the moment. According to the latest Sensis Business Index, one in four Aussie businesses has been knocked back for finance in the last three months, and 38 per cent of retailers say finance has been harder to get.
Still, retailers can and should think about clearing inventory to build up a buffer of cash while they can.
“Look at your stockholdings, which are more surplus to requirements and could be run down during this time of artificially high demand demand due to the stimulus? Transfer those stock lines to cash, so you have some sort of buffer” Walsh advised.
His overarching message for retailers is to prepare for things to get worse.
“Despite what you might read in the paper, this is not as bad as it’s going to get. My view is, this is as good as it’s going to get,” Walsh said.
Approximately 200 employees lost their job due to the collapse of G-Star Raw. They are expected to be paid 100 per cent of what they are owed, thanks to strong in-store trading during the administration period.
Unsecured creditors are expected to receive between 30 and 60 cents on the dollar, but Walsh said their claims are harder to quantify.