The parent company of a franchised outdoor furniture business that lists 27 stores on its website has fallen into the hands of administrators, as insolvency experts say the rough start to 2018 for the retail sector is something everyone should have seen coming.
Anthony Elkerton and Justin Holzman of DW Advisory were appointed as voluntary administrators to The Outdoor Furniture Specialists Pty Ltd, the parent company of The Outdoor Furniture Specialists brand, on January 24.
The company, which lists close to 30 showrooms on its website, is a franchised operation with a retail presence in all Australian states.
DW Advisory confirmed to SmartCompany this morning that it has only been appointed to the parent company and not any individual franchisees.
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Inside Retail reports the stores will continue to trade while a report is prepared for creditors of the business.
“A report to creditors will be issued in approximately four weeks,” Holzman said in a statement provided to SmartCompany.
The company says on its website its stores have been trading for more than 25 years, offering outdoor settings, beach umbrellas and other furniture.
The first meeting of creditors is scheduled for February 6.
Given e-commerce, January’s retail climate “predictable”
Partner at insolvency specialists Jirsch Sutherland, Amanda Young, believes the local retail sector should have expected a challenging January given troubles in the US and United Kingdom.
“People aren’t going into stores, rents are rising, and retail stores are closing as a response — we’ve really seen the US and the UK’s retailers suffer,” she tells SmartCompany.
With so much insolvency activity early in the year, Young observes businesses are doing what they can to become leaner in the name of survival, reflecting that a voluntary administration isn’t necessarily a death knell for a company.
“It’s not always terminal — and it could end up being that a company can come out as a viable business,” she says.
This year voluntary administrations of retailers have come thick and fast, starting with fashion retailer Maggie T in earlier January, right up to the collapse of discount grocery chain NQR this week.
Young says administrations can give businesses “breathing space” to look at their store networks and restructure for future success. However, she also observes that in the current climate of high rents and big competition for consumer spending, some retailers still haven’t got the basics right when it comes to the size of their store networks and their ability to pay all obligations.
“There is still space for retail growth, but it’s just a matter of retailers being across the back office stuff. We have had a case of a 30- or 35-retail store business, which was owned, but when we saw it we found it was poorly run, there were no profit margins on stock, and the rent was just ridiculous,” she says.
In cases like this, the most important thing a business and administrators can do is look at where to cut costs to keep the business afloat, Young says.
“You walk in and the first thing you look to see is, ‘what kind of reductions can you make, to have the company work?'” she says.