The news that Jan Cameron and the directors of Retail Adventures, owners of Go-Lo, Sam’s Warehouse, Crazy Clark’s and Chickenfeed stores, have called in the receiver came as a huge surprise to me.
Not so much the timing, as there had been rumblings amongst the supplier and peer retailer community for some time. The surprise was that Jan Cameron, arguably one of Australia’s best retailers, has struggled to turn around a discount chain in a recessionary climate. The receiver will allow Jan to have a second try.
When it comes to large enterprises, receivership is a stage companies go through to tidy up their balance sheet. It’s not a bad thing, it’s not a thing to be ashamed of; it’s just part of the cycle of renewal for businesses in western democracies.
In the US, Chapter 11 is a halfway house that is just short of receivership, where companies can continue to trade whilst negotiating with their debt holders, suppliers and other stakeholders. Almost every airline and car company in the US has been through Chapter 11, some more than once, and all are around today because of that process.
So, that means our own Australian Ford and Holden have been through that process by dint of their parent companies in the US. The company shareholding often changes hands, as new shareholders and new and old debt holders choose to support the newly re-structured business. Receivership or a Chapter 11 might not be popular if you are a shareholder, debt holder, business owner or investor – I have been one or both almost every year for the past 15 years – but it’s a crucial part of the business world.
Jan Cameron, in her forties, built the brand Kathmandu from nothing. In her early fifties she sold it for around $300 million, and subsequently featured in various ‘Rich Lists’. In 2009, and in her late fifties, Jane – self-admittedly – got bored and saw the opportunity to reinvest a substantial part of her sale proceeds from Kathmandu into a chain of discount stores. So, she paid $80 million, mostly her own money, for Go-Lo, Sam’s Warehouse, Crazy Clark’s and Chickenfeed. And she bought the stores from… the receiver. The group had been placed in the hands of receivers with $200 million in debt. Funny how that cycle works, isn’t it?
Anyway, new shareholders with new debt came in and began the process of rejuvenation. A new leadership team was recruited, poor performing stores were closed, leases re-negotiated, new supply chains set up and store brands were removed or renewed.
Along this journey, the newly morphing company still paid out more money in costs each month than it received in its tills from shoppers. To paraphrase Charles Dickens’ Mr Micawber in David Copperfield, “Annual income twenty dollars, annual expenditure nineteen dollars, result HAPPINESS. Annual income twenty dollars, annual expenditure twenty one dollars, result MISERY”.
As a business, you can only do that for so long. Basically, Jan and her team ran out of time to turn this around. In days when money was easier to come by, the banks would probably have extended terms. But not now, it’s too risky.
My feeling is that Jan will try again to turn this business around on a lower cost base. It’s important that she or somebody tries. Retail Adventures is a large business, providing jobs to many employees in some of Australia’s highest unemployment suburbs. I wish Jan, her employees, suppliers and the receivers good fortune.
As CROSSMARK CEO, Kevin Moore looks at the world of retailing from grocery to pharmacy, bottle shops to car dealers, corner store to department stores. In this insightful blog, Kevin covers retail news, ideas, companies and emerging opportunities in Australia and across the world. His international career in sales and marketing has seen him responsible for businesses in over 40 countries, which has earned him grey hair and a wealth of expertise in international retailers and brands.
CROSSMARK Asia Pacific is Australasia’s largest provider of retail marketing services, consulting to and servicing some of Australasia’s biggest retailers and manufacturers.