The Godfreys vacuum chain has been revived after a period in the hands of private equity firm, Pacific Equity Partners (PEP). Founded during the great depression by Godfrey Cohen in Chapel St, Prahran, in Melbourne, the retail chain was sold in 2006 to a 50/50 joint venture of PEP and CCMP Capital Asia for more than $300 million. It had 151 stores when the sale was completed, two years after Cohen died. PEP, which lost its investment in book chains Borders, Whitcoulls, and Angus & Rob
bertson when RedGroup Retail went into receivership in 2011, also lost money on the Godfreys chain and narrowly avoided another administration through a debt restructure in January 2012.
Godfreys suffered a sharp fall in sales and profitability, with store closures and a damaging dispute with franchisees.
The debt restructure effectively wiped out all of the funds of the private equity firms, with financiers converting debt to a shareholder loan following an unsuccessful attempt to sell in mid-2011.
Former MD, Tom Krulis, (who departed in 2007) was part of a consortium that continued negotiations with its frustrated financial backers, including Nomura, AMP, SC Lowy, Orchard Capital, and Challenger.
The January 2012 deal cut direct debt commitments from $210 million to $20 million and saw Krulis return to Godfreys as CEO, and Cohen’s former business partner, the 95 year old John Johnston, return as a substantial shareholder Godfreys.
Johnston remains active in business, with a stake in The Shaver Shop and a deal afoot to buy into Fusion Retail.
Krulis’ return to the key executive role was crucial to the support of financiers, whose confidence had been burned by the private equity owners who had, according to Krulis, made some worthwhile changes in the back office but made many mistakes in retail operations.
The new order
Returning to the CEO role, Krulis has focused on rebuilding the chain as well as repairing relationships with suppliers and franchisees.
He determined the motivation of sales people, an improved product offer, and revamped marketing were key priorities if the retailer was to regain momentum and rebuild store traffic, sales, and profitability.
Krulis has also invested in a stronger web presence, with online sales shared between the franchisor and franchisees.
Two years on, the chain has rebuilt its store network to around 200 outlets, with each effectively sharing 0.5 per cent of the profits from online sales.
He says the business is continuing to innovate and has a pipeline of new products, having redefined its positioning as a cleaning products retailer rather than just a vacuum retailer.
The company is also evaluating new retail concepts and developing an omni channel approach that includes home visits to customers as well as store, online and telephone interaction.
This article appeared in Inside Retail PREMIUM issue 1984. To subscribe click here.
