Jeanswest administrator reveals the shop-killing trends he blames for Australia’s ‘retail killing season’
- Clothing retailer Jeanswest was placed into administration last month
- The shift to online shopping contributed to the demise of brick and mortar stores
- Black Friday and click frenzy sales in November steer consumers online
- Administrators are surprised by how much debt some companies have acquired
In the midst of a ‘retail apocalypse’, the administrator in charge of collapsed clothing brand Jeanswest has revealed the trends closing down hundreds of stores in Australia.
KPMG partner James Stewart said Jeanswest had been losing money for many years, and cited consumers switching to online retailers as a reason for its demise.
Mr Stewart, who was appointed administrator of the Australian operations of the fast-fashion retailer, also blamed flash sales for the collapse of brick and mortar stores.
Black Friday, Cyber Monday and Click Frenzy sales that operate in November steer consumers online and away from stores.
Jeanswest owes creditors up to $50million but the cost could spiral higher once staff of the collapsed clothing retailer are paid out
‘If you’re doing twice the sales in November at half the margin, I don’t think that makes for a good Christmas,’ Mr Stewart told the Australian Financial Review.
Mr Stewart said online sales make up 17 per cent of non-food retail sales in the country, 3 per cent of food and grocery sales, and 9 per cent of total retail sales.
Despite Bardot and Harris Scarfe – who both collapsed in the last year – having a large online presence, the change from in-store to web shopping hit their brick and mortar business hard.
KPMG partner James Stewart – who was appointed administrator of the Australian operations of Jeanswest – said the retailer had been losing money for many years, and cited consumers switching to online retailers as a reason for its demise
‘When retailers are working off an EBIT margin of two, three or five per cent and a big chunk of your sales go online … and you’re not doing the same productivity from your store network, that has a big impact,’ Mr Stewart said.
‘There’s a sustainable model, which is a mix of online and physical stores but as the consumer is rapidly running towards a digital environment to do their shopping, many retailers find it very difficult to reduce their overheads and their fixed store infrastructure fast enough.’
Mr Stewart said he is surprised by how much debt some companies have acquired.
Jeanswest owes creditors up to $50million but the cost could spiral higher once staff of the collapsed clothing retailer are paid out.
The retailer will close 37 stores across Australia, with 263 of its 988 staff to be made redundant, after it was placed into voluntary administration this month.
An initial look at the company’s financial state showed it owes 1,200 creditors and the majority of those are employees.
The company’s debt to creditors was between $40million and $50million according to KPMG.
Staff are owed about $2.6million, however, that figure does not include any redundancy payouts, Mr Stewart said.
HSBC Bank is owed about $11million – the largest amount for the company.
Landlords are owed about $2million, but that figure might increase as there may be additional claims when the 37 stores are closed.
Experts have warned Bardot and Harris Scarfe are just the start of the downfall of big-name Aussie brands