Potential rescuers are already starting to emerge as administrators start to review the books of the collapsed Australian franchise of Topshop and Topman.
The Australian franchise of the UK fast fashion brands collapsed into voluntary administration on Wednesday.
Administrators from Ferrier Hodgson were appointed to Austradia Pty Ltd, which operates nine stand-alone Topshop and Topman stores in Australia. The business also has 17 concession operations within department store Myer, and an online sales channel.
The Topshop and Topman brands are owned by British fashion retailer Arcadia Group. In 2011 the separately owned and operated Australian franchise of the brand launched its first store at a flagship location on Melbourne’s Chapel Street.
The brand’s Australian operations are majority-owned by retailer Hilton Seskin, who also has connections to sports retail chain JD Sports. In 2012 Seskin told SmartCompany the Topshop brands were focused on ‘affordable’ rather than cheap fashion offerings.
“Topshop is an international fashion mecca, so we ride on the back of economies of scale,” he said at the time.
In 2015 Myer bought a 25% stake in the Australian Topshop franchise, with chief executive Richard Umbers unveiling the deal as part of the “New Myer” strategy.
In a statement on Wednesday, administrator James Stewart said the Australian business will continue to trade as usual while administrators work with Arcadia Group “on supporting and right-sizing the Australian business to a sustainable platform going forward”.
Topshop and Topman employ 760 staff members in Australia and the brands have annual sales of $90 million, according to administrators.
Employees will continue to be paid during the administration period and gift cards and returns policies will continue to be honoured, says Ferrier Hodgson.
Over the weekend Topshop Australia advertised a 30% off full price items in-store. On Facebook, several customers used the posts about the sale to complain to the brand that they were yet to receive items ordered through the site’s online store, which promises delivery within three to five working days.
Potential buyer emerges
Administrators have already been in touch with the chairman of the UK company that owns the Topshop and Topman brands, Sir Philip Green, reports The Australian, fuelling speculation that a potential rescue deal could be in the works.
“Sir Phil Green is very supportive of the business and the expectation is that it will go through a process and come out the other side in a slightly different shape,” administrator James Stewart told The Australian.
Administrators Ferrier Hodgson have said the immediate priority is to come up with strategies to “right size” the Australian franchise operations.
Another significant stakeholder in these discussions is department store Myer, which bought a 25% stake in the business in 2015.
In an announcement to the Australian Securities Exchange this morning, Myer says it now owns a 20% interest in Austradia, and its 17 concession stands will continue to trade as normal as the retailer works with the administrators and UK parent company.
It’s unclear how many staff work in Myer concession stands for the brands. This morning a spokesperson for Myer told SmartCompany the department store had been “pleased with the performance” of the Topshop and Topman brands since 2015, particularly in terms of driving engagement across its youth categories.
Topshop “was last to market”
While it will likely be some time before an outcome of the voluntary administration process is known, retail experts have suggested the timing of the international retail brand’s entry into Australia may have contributed to the current situation.
Paul Harrison, a professor of marketing and consumer behaviour at Deakin University, told SmartCompany the Topshop franchise arrived on Australian stores too late, and it struggled with differentiating itself from the very start.
“Topshop was last to market and my risk–averse side of things would say that is a bad move … [as was the decision] to not necessarily change the brand feel to change this market,” Harrison says.
“The first thing was that H&M has first mover advantage — they were able to establish a market here. Topshop didn’t have an established brand, a lot of the placement of their stores was kind of strange, as well. H&M stick themselves in quite prominent centres and make a show and tell about it.”
Harrison says that despite enthusiasm for international brands, the Australian market remains relatively small, and brands like Topshop haven’t always made it immediately clear who their market is.
Meanwhile, he believes Myer’s decision to buy into the brand in 2015 “doesn’t seem very sophisticated”.
This is because question marks still remain over how different Topshop and Topman’s offering was to what the department store could already offer, Harrison believes.
“It seemed opportunistic but maybe not [with] due diligence – I would have said, ‘How is this any different, would it be better for us to create our own brand?”’