There’s no more Christmas joy

The glory days of Christmas past, the grim tidings of Christmas present and the uncertainty of Christmas future will loom large in analysis of 2019 yuletide results. The optimistic spruiking to encourage consumer spending and the excitement of  Black Friday and Cyber Monday have certainly provided little cheer to many retailers.

The devastating bushfires also seem to have delivered another telling blow for retailers struggling to entice consumers to spend, a challenge underlined by the ANZ Roy Morgan consumer confidence index that has dipped to the lowest level since 1990.

The confidence drop is compounded by the longer-term impact of technological change as the digital economy erodes the market share, sales and profitability of bricks-and-mortar retailers.

Recent years have seen a number of retailer failures around this time of the year, but the summer of 2020 has been dramatic in terms of collapses and store closures and restructuring by other retailers feeling the chill of declining fortunes.

The most notable collapse has been the Harris Scarfe department store chain, placed in the hands of administrators virtually days after ownership was formally passed by Greenlit Brands to private equity firm Allegro Funds.

Deloitte Restructuring Services will close 21 Harris Scarfe stores by February 2 as it attempts to stabilise and restructure the business while seeking a potential buyer.

The store closures include the iconic flagship store in Adelaide’s Rundle Mall. It was redeveloped in 2013 as part of a shopping complex but apparently was racking up substantial trading losses.

The administrators won court approval last week to extend their appointment for five months to allow them to restructure the business which will continue to trade at 44 locations in the immediate future. But there are indications that at least six more stores may be closed.

The administrators claim to have had discussions with more than 20 possible buyers for the business and are continuing negotiations with four entities. Allegro Funds is not one of the four entities involved in those negotiations.

Whether or not the Harris Scarfe brand survives, the collapse is likely to result in legal action, with landlords and suppliers considering their options on the basis the retailer may have been trading while insolvent.

Legal action by suppliers and landlords could involve both Greenlit Brands and Allegro Funds, which assumed responsibility for around $70 million in Harris Scarfe debt as part of its acquisition of the business in November last year.

Allegro Funds is a secured creditor of the collapsed retailer in respect of the debt. It may also be considering legal action against Greenlit Brands over the disclosure of the true financial position of Harris Scarfe.

Women’s fashion retailer Bardot was another pre-Christmas retail casualty, appointing KPMG as administrators in November for the 72-store chain. KPMG will close 58 stores by March, leaving just 14 locations in Victoria and NSW trading.

The administrators have advertised the business for sale, expecting interest in the retailer’s online and overseas platforms, which were apparently trading successfully.

Basil Artemides, who started Bardot in 1996, blamed the collapse of the retail stores in Australia on the “highly cluttered, and increasingly discount-driven market”.

The future of another well recognised retail brand, Jeanswest, is also in doubt with the appointment of KPMG as administrators

last week.

The administration only includes the Australian operations of Jeanswest Corporation, which is owned by the Hong Kong-based Yeung family, who bought the business from the Hong Kong public company Glorious Sun group.

Jeanswest has 146 stores nationally but it is expected KPMG will identify closures as part of a restructuring plan the administrators hope will attract a new owner. Sales for the denim retailer have been declining for several years, like Bardot, squeezed by competition from international retailers entering the market and other Australian chains as well as changing consumer fashion choices.

While administrators of Bardot and Jeanswest hope to find buyers for the two chains, Curious Planet failed to find a white knight and will exit all 63 stores within two months. Curious Planet was previously known as Australian Geographic chain, but was forced to rebrand when a licence agreement was terminated.

Founded by Dick Smith, the loss-making educational retail

chain was acquired by University Co-op in August 2016 from the Myer family.

University Co-op called in PWC as administrators in November with the current focus on attempting to secure the 34 bookshops trading on university campuses, which have been losing sales to online vendors.

Also closing all stores is the Dimmeys discount soft-goods and apparel chain, while the Debenhams department store in Melbourne that was established by Greenlit Brands in 2017 is shutting its doors.

The electronics retailer Bose has announced it will exit its 19 stores in the Australia in the next few months, relying on its e-commerce platform to maintain a market presence.

EB Games has more than 400 outlets throughout Australia but, like many retailers, is looking to cull unprofitable stores, with 19 set to close this month. EB Games is, however, planning to open an unspecified number of larger-format stores this year.

Unfortunately the roll call of troubled retailers is likely to increase in the year ahead, especially for the chains who missed out on a much needed boost in Christmas trading.