The Australian master franchisee for multinational discount retailer Miniso has collapsed into voluntary administration after the COVID-19 pandemic saw sales tank in recent weeks.
Miniso Master Franchisee Pty Ltd, the main revenue generating entity associated with Miniso’s business in Australia, appointed administrators from Grant Thornton earlier this week, owing an estimated $14.6 million to creditors.
The business, operated under a brand license from Hong-Kong based Tabata Holdings, is one of several companies associated with Miniso’s Australian arm, and is responsible for most of the retailer’s local leases – including support offices in Melbourne and Sydney.
Miniso has 31 trading stores in Australia. However, about a dozen franchises, and eight other stores owned under various joint venture arrangements, are not in administration.
These stores are nevertheless heavily reliant on the master franchisee, which holds and distributes stock to related parties on behalf of Miniso’s China-based parent company.
The administration does cover a further nine stores wholly owned by Miniso itself, SmartCompany has confirmed.
“It would appear from our early enquiries that the company entered into voluntary administration generally due to the difficult trading conditions as a result of COVID and consumer trading habits being restrained,” Grant Thornton administrator Philip Campbell-Wilson said in a statement.
“Our investigations will provide more background on that. We are working with the franchisees, the landlords, management and other key stakeholders to reset the business model to ensure it has a long term trading position in Australia. There is still support for the business to keep going which is important for the franchisees.”
Documents sent to creditors, seen by SmartCompany, reveal Miniso’s local directors have been negotiating with Grant Thornton since May, amid ongoing concern the coronavirus crisis would render the business insolvent.
Campbell-Wilson has since concluded the master franchisee is currently unable to cover its liabilities, amid uncertainty over the veracity of the company’s books.
The business has slightly less than $1 million in the bank, the administrators told creditors in a recent affidavit, seen by SmartCompany.
The scale of Miniso’s coronavirus downturn has been difficult to determine because records may not be accurate, although no evidence is presented of any foul play.
“The books and records do not, we believe, accurately record the income and expenses of Master Franchisee,” administrators said.
Inconsistencies in information provided to administrators by management are understood to have arisen from uncertainties in stock levels during the pandemic.
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Miniso’s big ambitions
Launched in Australia back in 2017, Miniso attempted to make a splash in the local market with an aggressive expansion strategy aimed at securing 300 locations in only a few years.
The company, headquartered in Guangzhou, China, has a reputation for ‘stack it high, watch it fly’ retailing, trading more than US$2.4 billion (AUD$3.44 billion) across about 3,500 stores in 79 countries.
But after opening 32 stores in Australia over two years, Richad Li, vice president of Miniso Australia, told Inside Retail last year the company was re-assessing its position, and would instead target 100 stores by the end of 2020.
The pandemic appears to have thrown yet another spanner in those plans; while only a “small number” of Miniso stores closed during the pandemic, it is understood the company suffered acutely from a decline in foot traffic, particularly because it did not have a very strong e-commerce strategy.
“The transmission of COVID–19 has almost certainly resulted in a decline in the retail stores’ sales,” administrators said.
Administrators are now asking creditors for an extension of time to negotiate with landlords — estimated to be owed a combined $2.6 million— about the future of Miniso’s store network in Australia.
While the most likely option at the moment is a restructuring that would see Miniso’s China-based parent maintain control of the business, all options, including a potential sale, are technically on the table.
The majority of Miniso’s local landlords, including ASX-listed centre owners Scentre Group, GPT Group, Vicinity Centres and Stockland, are not currently understood to be receiving rent payments during the pandemic.
Other creditors, including ANZ Bank, the Australian Taxation Office and parent company Tabata Holdings, are owed more than $6 million combined, with the China-based parent the largest creditor.
Miniso is just the latest local retail asset to fall on tough times against the back drop of the coronavirus crisis, with others like Seafolly, G-Star Raw, Tigerlily and ASX-listed PAS Group also appointing administrators in recent months.
More to come …