Howards Storage World mounts last ditch salvation bid

howardsThe propensity by retailers to indulge in rapid expansion and obsess over year-on-year growth has claimed another victim, this time Australian icon Howards Storage World (HSW) entering voluntary administration.

Services firm Deloitte has been appointed to mount a salvation operation for the home organisation and specialty storage retailer, with a view to selling the business.

However, it’s not all doom and gloom for the retailer just yet. Inside Retail understands that a number of parties are interested in the business – not just for its assets but as a going concern.

Dan Da Silva, managing director of Cycam – a boutique corporate and finance consulting firm and member of the Australian Private Equity and Venture Capital Association – told Inside Retail Weekly that the company is in the process of tabling a proposal to take over the retailer.

Cycam has been involved with HSW for around four years and part of the transitioning of its business franchisees into a corporate structure.

The company is headed up by Dirk Spence, who holds a 55 per cent sharehold and helped grow the business through franchising over a number of years, after forming a partnership with company founders, by Les and Edda Howard in 1997.

Speaking to IRW, Les Howard said the company’s voluntary administration was disappointing for all involved, particularly its staff, suppliers, bank and his family. Howard resigned as a non-executive director in September of this year, and has been a minority shareholder for several years.

Last month, the company’s Singapore venture was put into liquidation, after a long period of poor trading. Howard said that the company’s decision to expand its Singapore operation, contrary to his own thinking, culminated in dragging millions out of the company’s cashflow.

“It became obvious to me and others that we weren’t making it [Singapore operations] and the economies of scale weren’t there,” he said. “So management decided in their wisdom to open more stores and two stores went to five – instead of lifting our position, that dragged the position down.

“No business becomes insolvent overnight. You work hardest to not go there but we were not successful.

“I am confident that we will rise from the ashes, not necessarily bigger, but better.”

howards-storage-worldDa Silva said there were probably five or six factors underpinning the company’s demise, including the number of loss-making stores and failure of the division called Howards At Home – a direct-selling business run at significant cost without much return.

He also said international ambitions for HSW were not the main cause but “a distraction”.

“The company lost sight of its core business. It’s a complicated business because they also import directly and cut out a lot of distributors. So between the international and importing, they are quite distracted from the fact that they should have been retailing better and taking care of the franchisees a bit better.”

Howard said Cycam has a long association with the company and that its franchisees are mounting a rescue package.

“The brand ‘Howards’ is well known, but there needs to be some dramatic changes in store numbers and merchandise,” he explained.

“It’s a complex business, capable of a turnaround in knowledgeable hands. Les is very much a friend of our activity and our proposed transaction,” said Da Silva.

“We believe the business can be run profitably but we need key issues to change,” he continued. “We would look to drop the words ‘storage world’ from its name and simply keep it as Howard’s, plus look at a new ranging and merchandising policy.”

HSW has a number of franchisees that are multi-store operators and holds an international footprint in countries such as the Philippines, Ireland, Spain, India and Singapore. It is Australia’s largest specialty retailer in the organisation and storage segment and competes with the likes of Bunnings, Ikea and Kmart.

The company turns over about $90 million, has about 80 franchisees, 30 company stores and approximately 280 employees across its various operations.

Its assets also include the successful loyalty program, dubbed ‘inspirations’ and has around 400,000 active members.

David Lombe and Vaughan Strawbridge from Deloitte have taken control of the business, with the company continuing to trade on a usual basis, with submissions for a potential takeover of the business having a deadline of 16 December.

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