Poor retail conditions and frightened consumers were blamed for yesterday’s collapse of the Queensland-based retailer Wow Audio Visual Superstores, with its 15 stores and 500 employees, but the seeds of this collapse were actually sown two years ago.
Ferrier Hodgson partners James Stewart, Stewart McCallum and Tim Michael confirmed yesterday they had been appointed as receivers and managers, prompted by a secured creditor.
The problems began back in 2010, when two directors of Wow Sight and Sound were caught up in a property sale with hundreds of millions of dollars, when banks appointed receivers to assets controlled by the two men.
The directors and co-founders, Sam Savvas and Suds Sotiris, served as directors of property group SSI. That company owned a number of smaller companies, including The Zone Australia and Aristocon. These two entities owned properties that were placed in receivership.
At that time, Wow Sight and Sound was not placed in receivership, and retail director Con Nicolas told SmartCompany in a statement that the company operated separately and was not affected – although Savvas stepped aside as chairman and chief executive. He passed away last year.
Guy Griffiths became chief executive in 2010, while Savvas said at the time these properties had been appointed receivers due to higher pressure in global property markets.
However, yesterday receiver James Stewart said the company had been negatively impacted by a bad debt of $20 million related to the collapse of Aristocon, one of the companies that oversaw some of the troubled properties.
Stewart said the group, which had $257 million revenue in 2010-11, “had been negatively impacted by a bad debt of approximately $20 million to a related company”.
“Wow has been subject to declining sales and profitability which has escalated in recent months,” Stewart also said.
The portfolio of assets placed in administration in 2010 was reportedly worth $400 million, including a commercial building worth $70 million on its own. It was reported there were more than 50 properties up for sale to recover debts of over $300 million, with several major banks involved in the entire process.
Before all this occurred, Wow had accepted a substantial amount of money from NAB’s private equity division, Integrated Capital Solutions. Nicolas told SmartCompany at the time the investment would be used to expand the company’s footprint – it wanted to open 25 stores within the following three years.
However, now the company has been placed in receivership. And while receivers have not made any announcement regarding store closures, it surely adds to the nerves felt by retailers across the country, who have already watched several businesses in a variety of industries announce the closure of more than 500 stores.
Receivers are now set to begin a sale campaign for the business, which has been well known in Queensland for its support of the Broncos rugby club during 2008-11.